Exclusive: Underscore VC closes its $58 million third fund as the firm completes a generational transfer

When was the last time you rerouted a flight for someone or something?

I certainly haven’t. But Lily Lyman, Underscore VC managing partner, definitely has. She’s hard-pivoted international travel plans, while pregnant and en route to a wedding, to meet a founder. And Lyman’s done it more than once, diverting a vacation to stop in London for one founder, and going from Mexico to San Francisco to get in front of another.

There’s a zen, self-effacing quality to the way Lyman talks about it, combined with determination. As it turns out, there are all sorts of stories like this—she even once offered to coach a kids’ lacrosse team to get a deal done.

Lyman was recently promoted to managing partner at Underscore, an early-stage firm started nearly a decade ago. And, amid a leadership transition from one generation to another, Underscore has closed its third fund at $58 million, Fortune has exclusively learned. The firm’s most notable investments to date include Hi Marley, Hue, Cloudzero, Slang, and Kard.

Underscore is based in Boston and, though the firm doesn’t only invest in its hometown, it is also a product of its place—as Lyman and I talk on Zoom, behind her, there’s a yellow, wall-high map of Boston.

“We joke that Boston’s always in the top-three ecosystems of early-stage funding—this year is number two, we beat New York!—but it’s always top-three,” said Lyman.

One LP told Fortune they invested in this latest Underscore fund because they liked Underscore’s odds at dominating early-stage in Boston over the coming decades. It’s an ecosystem defined by its close ties to academia (about one-third of Underscore’s portfolio comes out of places like Harvard and MIT) and a track record of success in life sciences and AI. Boston’s startup success stories are also starting to pave the way for more founders.

“We’re seeing a whole bunch of little ‘mafias,’ if you will, spinning out of places like HubSpot, Klaviyo, Datarobot, Flywire, and Toast—a lot of those folks are actually part of our Core Community,” said Lyman.

This Core Community—a network of entrepreneurs, operators, and executives who advise founders—is part of the vision that Underscore founder Michael Skok had when he considered launching a VC firm.

In 2014, the year before he cofounded Underscore, Skok went on a listening tour of sorts, speaking to founders as they especially lamented the challenge of finding the right people at the right time in their startups’ evolution, and listened as they expressed their general low-regard for VC firms. He co-launched Underscore with a goal to "organize founders to help founders, and do so in a community that’s self-serving.”

And from the start, Underscore was set up for a generational transition. “I've made it very clear the management company has zero value and would have no value,” Skok says of the firm. “It would be budget-based, and we wouldn’t take any access fees.”

That’s made the current leadership transition more natural, even in the most difficult and unexpected circumstances. Underscore cofounder John Pearce passed away last year, and Skok learned he had a brain tumor. Skok was given a choice—ten days to live, or go into surgery. He chose the latter, and sometime later, he is very much still here—and incredibly enthusiastic about my Orson Welles movie recommendations (a rare occurrence, I assure you).

Skok feels strongly about setting Underscore for success, even if it means he has to get out of the way: "People don't understand this, but even if you're just a presence in the back of the room, you’re still taking up space,” Skok told me. “So, I needed to not be in the room."

So, he’s passed the baton to Lyman, and the firm is moving towards its future. Because that’s what being alive is, right? The worst possible thing happens—then you wake up the next day and figure out how to keep on living. And Underscore’s at an inflection point, amid a larger AI-fueled inflection point for the industry. For all the twists and turns of the last year, Lyman sees opportunity.

“How lucky are we? That’s really how I feel, and I think that’s how our team feels,” she told Term Sheet. “As we wrap up this transition, we’re kind of like ‘well, let’s go.’”

And Lyman seems ready to go. For me, I’m still stuck on the rerouted flights to founders: I’m competitive, but this one’s new to me. I texted Lyman: Would she do it again?

“The short answer is yes,” she called me to say. “Within the appropriate boundaries of work-life balance, yes…As long as you’re not sacrificing sustainability, you gotta bring a little hustle.”

See you Monday,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
Submit a deal for the Term Sheet newsletter here.

Joe Abrams curated the deals section of today's newsletter.

This story was originally featured on Fortune.com