MENLO PARK, CA--(Marketwired - Apr 27, 2016) - Menlo Ventures, a 40-year-old venture capital firm and among Silicon Valley's pioneering startup investors, announced today the closing of the $250 million Menlo Opportunity Fund, which will invest in early growth companies, typically Series B and C rounds, when the companies are at their initial inflection point.
This is the first time Menlo Ventures has created a fund solely targeting these types of investments.
The fund, which was raised in six weeks and oversubscribed by existing limited partners, was formed to take advantage of early growth stage opportunities at a time when funding in this stage is declining. Menlo Ventures intends to help fill the "Venture Valley" by focusing on the most promising entrepreneurs and companies at the Series B and C stages.
The "Venture Valley" is the gap created by non-traditional investors and venture growth funds exiting Series B and C rounds and focusing more on late stage rounds (Series D and beyond). As a result, these Series B and C rounds are declining. According to PitchBook, there were 371 venture capital fundings of B and C rounds combined in the first quarter of 2016, down from 403 in the first quarter of 2015.
Investors are predicting that this trend will continue for the next year.
"We believe the best investments of the next decade will be made in the next 24 months, and the Menlo Opportunity Fund is well-timed," said Venky Ganesan, a Menlo managing director. "Now is the time to be more capital efficient, but it is not the time to pull back. Many investors are ignoring the early growth stage, which creates an excellent opportunity for Menlo to partner with the iconic entrepreneurs of tomorrow and support the market leaders in our current portfolio."
Early Growth -- "Inflection Point" Investment Experience
Menlo has had a strong and successful history of making early growth investments (3Par, Uber) as part of the firm's overall seed to growth strategy in its main funds. Recent team additions have added to the firm's expertise in the early growth area. Venky Ganesan, who joined Menlo from Globespan Partners a few years ago, was an early growth investor in Palo Alto Networks, Redfin and Virident. Matt Murphy was General Partner in both the growth fund and venture fund at Kleiner Perkins, leading to investments in market leaders like AppDynamics, InsideSales, Datastax, Simplivity and Docusign. The firm's limited partners understand these strengths and also see great value in the early growth investment class.
The average size of an investment by Menlo's Opportunity Fund will be $20-25 million and ranging up to $50M. Fifty percent of the new fund will be invested in existing portfolio companies in Menlo XI and XII, with the other 50% earmarked for new investments. The fund will be invested concurrently with Menlo's main fund, not as a standalone fund. Menlo's main $400 million fund, Menlo XII, will continue its multi-stage strategy.
"We're thrilled to be expanding our capital base to partner with great entrepreneurs at both an opportune and uncertain time in the market," said Matt Murphy, Menlo Ventures managing director. "We'll continue to focus the majority of our investments in the Opportunity Fund on six sectors. In enterprise, the sectors are cloud infrastructure, SaaS and cybersecurity. In consumer, the sectors are marketplaces, fintech, and e-commerce," he added.
Menlo Ventures managing directors Venky Ganesan, Matt Murphy Mark Siegel, and Pravin Vazirani will lead the Opportunity Fund.
Menlo Ventures provides capital for multi-stage consumer and enterprise technology companies. Since 1976, the firm's market-driven analysis has led to the identification of opportunities and successful investments in innovative technology markets. Notable areas of investment have included mobile/mobile marketplaces (Siri, Uber, Machine Zone, Roku, Rover.com, Getaround, Munchery), social & ecommerce (Tumblr, Lumosity, Poshmark), Cloud (Carbonite, EdgeCast, Dropcam, Vidyo), dtorage & Big Data (3Par, Coraid, Tintri, Avere Systems), digital advertising (Flurry, YuMe, DataXu, Dstillery, eXelate), and security (Cavium, IronPort, nCircle, BitSight, vArmour). Menlo's portfolio includes more than 70 public companies and more than 100 mergers and acquisitions. Menlo Ventures has $4.65 billion under management and is currently investing Menlo Ventures XII, a $400 million fund with $15 million allocated to the Menlo Talent Fund for fast seed funding, and the Menlo Opportunity Fund, a $250 million fund that targets solely early growth investments. For more information, visit www.menlovc.com.
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