SAN FRANCISCO (Reuters) - Late-stage venture firm Institutional Venture Partners said on Thursday it had raised $1.4 billion for its latest fund, IVP XV, showing continued investor appetite for late-stage private companies even as the public-market’s appetite seems to be flagging. [ID: nL3N0X32VZ]
The fund marks a considerable boost over the $1 billion IVP XIV raised in 2012, and to some extent reflects the growing tendency of late-stage startups to delay tapping public markets for funds and instead turn to late-stage investors. Josh Kopelman at First Round Capital has dubbed the phenomenon the “Private IPO.” (here)
While some investors fret that the private markets generally value these companies too highly, IVP general partner Sandy Miller said exceptional growth, at least among the firm’s portfolio companies, justified the cash infusions. Revenue at portfolio businesses more than tripled on average between 2014 and 2013, he said, compared to doubling three years earlier.
“Companies are growing faster today than companies have ever grown in history,” he said on Wednesday. “It’s partly the scale of the marketplaces people are addressing.”
Those potential marketplaces include big-use cases and customers, with portfolio companies such as online-file storage system Dropbox and customer-support provider Zendesk going after widely used services and the largest corporate clients.
On the consumer side, plays such as photo-sharing service Snapchat generally consider any person with a smartphone as part of their market.
Still, some fast-growing companies disappoint when they do finally reach public markets. File-storage company Box, which is not part of IVP’s portfolio, held a January initial public offering that valued the company at $1.67 billion, compared to a $2.4 billion valuation at its last private financing in July.
Part of the reason IVP’s fund size has grown, Miller said, is that the firm now employs seven general partners, compared to five at the launch of IVP XIV. The firm is still investing from IVP XIV, he said, but plans to tap the funds raised in IVP XV by the end of the year.
Last week, venture firm NEA said it had raised a $2.8 billion fund plus a separate $350 million late-stage fund, while Menlo Ventures said it raised $400 million. Along with IVP, the total for the four firms is almost $5 billion.
Last year, the total raised by venture firms over the entire second quarter was just over $8 billion.
Editing by Ted Botha