The Up Round #5

The Memo

Welcome to the fifth issue of The Up Round. As a reminder, this is a "round-up" of relevant news and resources for fund managers building a best-in-class firm. Expect us to land in your inbox every other weekend.

The news cycle over the last couple weeks might suggest that we're entering the summer doldrums that were once common place. One interesting quote from a HNW LP who sees most new funds and is a bit of a GP "whisperer" if you could call him that... "I am not seeing any LPs make new commitments now because they are not getting expected distributions from any asset class. Most are reducing the number of funds to which they are re-upping (or reducing commitments to those funds)." Not to be a downer but this is the reality of the situation at present.

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Apollo is building a team to provide family offices with investment solutions, advisory services, and access to the firm’s global network of relationships. The legacy alternative asset managers are increasingly expanding the access to capital outside traditional pensions, endowments, etc to reinforce their ambitions as asset accumulators. As a note, KKR and Blackstone have also launched similar efforts after a decades-long push into insurance which was another asset gather play, inpart. (link)

Other Reads, Listens, Watches

🎙️Venture Unlocked: Sunil Nagaraj of Ubiquity Ventures (link). Ubiquity is focused on “software beyond the screens” including B2B technology companies that utilize machine learning or smart hardware. We’d point out the discussion around managing fund sizes (28 minute) and making exceptions to ownership (38 minute).

Finding the New Stable Points in VC (link). Whilst this is a year old, we have seen this resurface over the last year as Frank Rotman (Founder of QED Investors) engages around conversations related to ownership and adjusting to a new market. The latter part of the presentation around “Stable Points” is particularly interesting - we’d point out Stable Point 2 is where there’s been the most recent historic growth but also where we’ll see the most attrition in the coming years.

100 Plus Funds Raised by Women (link). The Venture Capital Journal’s analysis has found that there are 102 women-led firms that have raised a combined $5B since the start of 2022. VC funds led by women are more likely to be familiar with challenges of accessing VC funding and supportive of other female founders. A great resource if you're looking to collaborate and diversify the cap tables you're on!

A Repo of Family Office Reports (link via Peter Ackerson). A resource for those who might be looking to better understand and empathize with this cohort of LPs. Reports are from Citi, Goldman Sachs, Morgan Stanley, among others.

Fund Debuts, Talent & More

Big Sky Capital Debuts its $20M Fund (link) Big Sky Capital’s debut fund will invest in early-stage enterprise SaaS startups that are using data and analytics to improve efficiency, productivity, and decision-making. The founders will also seek to support immigrant founders given their own backgrounds having been Kazakh immigrants to the US. Big Sky has already made a number of investments, including Clockster, Title Search, and Swaypay.

Azolla Ventures Closes Fund I (link). Azolla Ventures was launched out of the nonprofit, Prime Coalition to fund startups focused on climate technology. With $239M in commitments, it will aim to invest in early-stage companies that are developing hardware solutions to address climate change with check sizes between $1M to $5M. Examples of early investments include a heat pump and a carbon storage startup.

Molly Alter Joins Northzone NYC (link). For those less familiar, Northzone is a European VC that has established an outpost in NYC along with offices in London, Amsterdam, and Berlin which allows their “glocal” strategy. Molly comes from Index and prior to that, Insight Partners with a focus on both consumer and enterprise software.

Sequoia Shakes Up Senior Ranks as Moritz, Vernal Exit Roles Along with Three Others (link). Sequoia Capital continues to make changes under Roelof Botha’s leadership with Michael Moritz, a legendary, longtime partner, has decided to step down to focus on the firm’s wealth management offerings marketing under Sequoia Heritage. Also, Mike Vernal who led investments in Rippling and Notion has stepped away but will continue to support the Boards he’s on. Alongside, three other Partners have also departed bringing the total investor headcount at the firm to 28.

Ryan Petersen Joins Founders Fund (link). Ryan Petersen, founder and former CEO of Flexport, has joined Founders Fund to focus on both early- and growth-stage investments. While supply chain technology might not be in the headlines these days as it was, this move could also be seen as underpinning the on-going relevance of the sector.

DCVC Announces $1B in Fresh Funding (link). DCVC has announced that it has raised $1B in their new fund, DCVC X to continue their investments in deeptech. The firm will continue to target a wide range of industries including healthcare, energy, and transportation.

Sapphire Ventures Plans to Invest over $1B in Enterprise AI Startups (link). “The $1 billion in capital will come from Sapphire's existing funds, which have $10 billion under management and about $3 billion waiting to the deployed. The majority will be a direct investment in AI startups, while some capital will also go to early-stage AI-focused venture funds through its limited partner fund.”

Wing VC Raises $450M Fund Three (link). Wing Venture Capital’s newest fund will continue its focus on investing in early-stage companies that use AI and machine learning in “the modern enterprise.” What’s interesting is how the firm has positioned the experience of it’s partnership through cycles. It’s also worth noting they tout the acceleration of their investment pace through the pandemic which most others might shy away from as they lick their wounds from deploying too quickly.

Mayfield Announces $250M AI Start Seed Fund and Adds Vijay Reddy to Lead (link). Mayfield’s AI Start fund will write seed investments of $1M to $4M into AI companies at the seed stage. Vijay Reddy who has over ten years of experience investing at the seed stage will lead the fund.

Giano Capital Launches €50M Secondary Fund Focused on Later-Stage Companies (link). Giano Capital is a Geneva-based growth equity firm that has launched a €50M secondary fund to invest in later-stage companies in Europe. The fund aims to focus on AI, fintech, and e-commerce companies. The firm is led by Alberto Chalon and Andreas Wiele, both who have successful experience as entrepreneurs in the technology sector. The fund will provide much-needed liquidity to existing shareholders of European deep tech companies and will also offer new investors the opportunity to invest in these promising new companies.

Belgium’s Amavi Capital Acquires Sweden’s SF Ventures (link). Belgian proptech investor, Amavi Capital, has acquired Sweden’s SF Ventures that was valued at €60M and the acquisition will double the Amavi’s proptech portfolio. Amavi plans to use the acquisition to support the growth of its portfolio companies while also expanding its reach into the Nordic region. Expect more acquisitions such as this as firms look to navigate a slowdown in fundraising activity by broadening their LP base by combining complementary portfolios.

Thought of the Week

VC funds the most innovative companies, but the industry still is fairly immature vs. PE. In PE, GP staking, GP continuation funds, NAV lending, placement agents, all commonplace (some of this requires RIA status, which few VCs are). I see a lot of change ahead.

— samir kaji (@Samirkaji) July 19, 2023

This is an interesting and valid point - alluded to above in this issue's headline article. VC is relatively immature but also the newest asset management competency depending on how you define and look at the advent of PE, real estate, credit, or even public equity investing. Whilst we've seen some sophistication enter the market by way of SPACs, changing RIA status, etc, it's been concentrated to the large, multi-stage firms who might be better likened to be the tech-centric KKRs, Apollos, et al. Part of the fund manager's job is to stay on top of such changes and adopt those tools that make sense for the success and longevity of their firm.