Key Takeaways

  • Greg Castle closed a $35 million Fund III for Anorak Ventures, intentionally keeping the fund small to target 100x returns in early-stage deep tech.
  • Rather than chasing visible defense platforms, Castle focuses on unglamorous upstream supply chains, backing companies like Knox Metals in steel and chemical production.
  • Castle runs technical diligence using AI models as an on-demand desk of analysts to parse complex engineering domains before writing seed checks.
  • Early angel checks into Oculus and Anduril shaped his strategy, moving him to test his edge systematically through Castle's 3-Question Venture Capital Transition Filter.

The Castle's 3-Question Venture Capital Transition Filter

After an early angel check in Oculus paid off, Castle paused before jumping into institutional venture capital. He used three sequential tests to decide whether to leave operating behind:

  • Question 1: Fiduciary Responsibility: What does it mean to be a responsible fiduciary of capital? What does this whole VC thing mean?
  • Question 2: Skill vs. Fluke: Am I any good at this? Or was Oculus just a fluke?
  • Question 3: Long-term Commitment: Do I want to do this? Do I want to devote the rest of my life to it?

When This Works (and When It Doesn't)

This filter works for early angel investors who catch a breakout winner and feel the urge to raise an institutional fund immediately. A single breakout hit like Oculus can easily masquerade as repeatable investing skill. Running through these three questions forces an investor to separate luck from disciplined portfolio construction before taking outside money from limited partners.

Where it breaks down is for founders seeking immediate operator-investor hybrids. Answering these questions honestly might push an operator to realize they prefer building products over managing quarterly investor updates and portfolio math. If your edge comes from active day-to-day engineering rather than capital allocation, stepping into a full-time fund manager seat can destroy the very instincts that made your angel bets work.

Sizing Down for 100x Upside

Most fund managers expand their assets under management as soon as institutional limited partners offer larger checks. Castle took the opposite route by capping Fund III at $35 million.

“I am very much of the opinion that every size of fund requires a very different skill set and a very different strategy,” Castle explained. “And what I proved out and what I'm good at is deploying smaller amounts of capital.”

A $35 million vehicle allows a solo general partner to own equity in raw seed companies without needing multibillion-dollar exits to return the fund. Castle looks past splashy consumer hardware and focuses on industrial bottlenecks. “I am actually a lot more interested in some really freaking boring areas in chemical production, in steel production,” he said, pointing to his investment in Zayn's Knox Metals.

His path into defense started through relationships with Palmer Luckey and Trey Stephens, which led to an early check into Anduril. Castle noted that the investment ignited a patriotic focus on backing American industrial capability. To evaluate technical areas where he lacks a specialized background, Castle leans into modern software tools. “It is like having kind of a desk of analysts at your disposal,” Castle noted regarding AI diligence workflows.

What to Do With This

If you scored a big angel win or had an early employee exit this year, audit your track record before pitching limited partners. Pull your last five angel investments into a spreadsheet. In column one, write the exact thesis you held on the day you wired the money. In column two, write what actually caused the company to grow. If the breakout happened for reasons you never anticipated, your win was a fluke, and you should keep operating.