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VC Daily : Debut Fundraising Success Rate

09/21/2021 | 11:26am EST

Good day. Debut fund managers are gaining more confidence and striking out to raise funds, as WSJ Pro recently reported. But what's their likelihood of success?

Fairview Capital, which invests in venture funds, analyzed a pipeline of debut venture funds owned by women or minority managers who were raising between 2014 and 2017. It found that overall 87% of the funds raised capital. But many didn't raise as much as they set out to. The median fund aimed for $75 million but closed at 44% below target, according to Aakar Vachhani, a partner at Fairview.

There were also differences within the diverse-fund data set based on gender. While 90% of male-led firms closed a first-time fund, 77% of women-led firms did so.

More than a third of all diverse first-time fund managers didn't go on to raise a second fund, Mr. Vachhani said, adding some joined other firms or gave up on venture capital.

These are heady days for some venture firms. WSJ Pro reported that Lee Fixel's Addition, for example, is out raising its third fund, having already closed on two $1.3 billion funds since last year. That's par for the course in today's market where the big firms are getting bigger, and where smaller efforts by less-proven names are finding it difficult to gain attention from limited partners.

"While not everyone is cut out to be a VC and many might underestimate the challenges, I do think the imbalance in success rates likely discourages some really talented diverse professionals from making a difference in the industry long term," Mr. Vachhani said.

And now on to the news...

Top News

Leveling the playing field. In today's frenetic housing market, buyers who take out mortgages are struggling to compete with those putting up all cash. Cash offers are more attractive because there is less chance the deal will fall through or be delayed due to financing issues. Now, a number of startups are offering programs to help level the playing field, The Wall Street Journal's Nicole Friedman reports.

Some of these companies front buyers the cash to buy their homes outright, while others buy houses directly on a buyer's behalf and then sell them to the buyer. The programs often target homeowners who need to buy a house before selling their current one.

Startups with cash-offer programs are expanding quickly. Companies like Ribbon, HomeLight Inc. and Orchard announced new funding rounds this month. Knock said this spring it is exploring plans to go public. Opendoor Technologies Inc., a house-flipping company that went public in late 2020, launched a cash-offer program in March. Real-estate brokerage Redfin Corp. is piloting a cash-offer program in some markets, a spokeswoman said.

86

The number of software companies that have gone public in the U.S. market so far this year, according to Dealogic, compared with 57 during all of 2020. (WSJ)

Freshworks Shouldn't Spoil on Delivery

Freshworks won't have the initial public offering world to itself this week, but the cloud-software company is appetizing enough to stand out in a crowded pack, WSJ's Dan Gallagher writes. Thirteen companies are slated to make their debuts this week, according to IPO Boutique. The largest of those will be Freshworks, which makes a suite of cloud-based software services aimed primarily at small and midsize businesses. The company will sell about $969 million worth of shares at the top end of its recently raised price range. That would land Freshworks a market value of around $9.7 billion.

Digital Freight Startup Transfix Going Public in SPAC Deal

Transfix Inc. plans to go public through a merger with a special-purpose acquisition company valuing the digital freight startup at $1.1 billion, the latest deal shaking up the middleman freight brokerage business, WSJ's Jennifer Smith reports. The blank-check merger with G Squared Ascend I Inc. would allow New York-based Transfix, which competes with bigger rivals including Uber Technologies Inc.'s Uber Freight business, to tap public markets for backing to expand its business of using technology to connect shippers with truckers and to expand development of additional services, such as transportation management software, company executives said.

Flying Taxi Startups Seek a Quiet Takeoff

If eVTOL aircraft companies are to achieve their commercial ambition of becoming flying taxis, then first they'll need to ensure their aircrafts are quiet enough to work in cities without disturbing residents. WSJ's George Downs looks into just how quiet these crafts need to be to take off.

Industry News

Funds

Blumberg Capital raised $225 million for its fifth fund to continue investing in big data and artificial intelligence. The San Francisco- and Tel Aviv-based firm recently participated in a $30 million funding round for cybersecurity platform Hunters. Blumberg Capital closed its fourth fund in 2017 with $206 million.

Fifth Wall, which invests in property technology, climate technology and retail, has raised more than $140 million toward its Climate Tech Fund. Investors in the vehicle, which has a $500 million target, to date include Equity Residential, Hudson Pacific Properties, Invitation Homes, Ivanhoé Cambridge and Kimco Realty Corp. So far, the new fund has backed ICON, Sealed and Turntide Technologies. Fifth Wall also said Peter Gajdoš joined the firm as a partner, where he will co-lead the climate tech investment team. He was most recently at IPM Group and Presidio Partners.

People

Accel named Sagar Sanghvi to the firm's investment team. He was previously chief financial officer of Instacart.

Exits

Genomics company Pacific Biosciences of California Inc. acquired DNA sequencing startup Omniome Inc. for approximately $316 million in cash and 9.4 million shares of Pacific Biosciences common stock. San Diego-based Omniome was backed by Madrone Capital Partners, ARCH Venture Partners, Domain Associates and others.

Publicly traded F5 agreed to acquire Threat Stack Inc., a provider of cloud security and workload protection, for $68 million. Boston-based Threat Stack is backed by investors including F-Prime Capital, Eight Roads, Scale Venture Partners, .406 Ventures and Accomplice.

New Money

Fivetran, an Oakland, Calif.-based provider of automated data integration technology, scored $565 million in Series D funding led by Andreessen Horowitz, giving the company a valuation of $5.6 billion. Previous backers including General Catalyst, CEAS Investments and Matrix Partners also joined in the round, along with new investors Iconiq Capital, D1 Capital Partners and Y Combinator Continuity. In addition to the new investment, Fivetran agreed to acquire HVR, a provider of enterprise data replication technology, in a cash and stock deal valued at $700 million.

SmartLabs, a Boston-based startup offering flexible lab and office spaces for research groups, raised $250 million in Series B funding led by ArrowMark Partners. New investors Winslow Capital Management and Onex Falcon also participated in the round, along with existing backers ArrowMark Partners, Conversion Venture Capital and Breed's Hill Capital.

Airwallex, an Australian cross-border payments startup, secured $200 million in an oversubscribed Series E round led by Lone Pine Capital, increasing the company's valuation to $4 billion. New investors G Squared and Vetamer Capital also contributed to the new funding, alongside previous backers 1835i, DST Global, Salesforce Ventures and Sequoia Capital China.

Blueground, a New York-based startup offering a network of furnished apartments for monthly or yearly leases, picked up $180 million in Series C funding, consisting of $140 million in equity and $40 million in debt. WestCap Group led the equity portion, which included participation from Geolo Capital, VentureFriends and Prime Ventures. Silicon Valley Bank provided the debt. Tom Gottlieb, co-founder and managing general partner of Geolo Capital, will join the company's board.

Lightricks, a Jerusalem- and New York-based creator of photo and video editing apps, landed $130 million in Series D financing, bringing the company's valuation up to $1.8 billion. Insight Partners and Hanaco Venture Capital led the round, which included additional support from Goldman Sachs Asset Management, ClalTech, Greycroft and Shavit Capital.

Saviynt, an El Segundo, Calif.-based cloud identity and access governance platform, closed a $130 million investment from HPS Investment Partners and PNC Bank.

GOOD Meat, a division of Eat Just Inc. that produces meat made from animal cells, added $97 million in new funding, bringing the round total to $267 million. Investors including UBS O'Connor, Graphene Ventures, K3 Ventures, Resilience Reserve and others provided the financing. Jim Borel, former executive vice president of DuPont, will join the company's board.

ClickHouse Inc., creator of an online analytical processing database management system, secured $50 million in Series A financing led by Index Ventures and Benchmark.

FloBiz, an India-based neobank for small- and medium-size businesses, fetched $31 million in Series B funding led by Sequoia Capital India, Think Investments, Elevation Capital and Beenext.

Propel, a Santa Clara, Calif.-based startup whose technology helps manufacturers deliver customer engagement services, nabbed $20 million in Series C financing. Salesforce Ventures led the round, which included contributions from Ankona Capital, Norwest Venture Partners, Cloud Apps Capital Partners and others.

Altana AI, a supply chain artificial intelligence startup, snagged $15 million in Series A funding. GV led the investment, which included support from Floating Point, Ridgeline Partners, Amadeus Capital Partners and Schematic Ventures.

Boom Entertainment, a New York-based creator of sports gaming apps, raised $15 million in Series A funding led by Sands Capital.

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09-21-21 1125ET

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