USV 2016, LP

This week, we will close our first investment in USV’s 2016 fund, which has total capital commitments of $175 million, the same size as our 2014 fund. This will be USV’s fifth early-stage fund. We continue to make new investments in our second Opportunity fund, which is not fully invested and has an investment life extending into 2018. As many of you know, our Opportunity funds invest in later-stage and non-traditional opportunities. We’ll do a separate post on this topic soon.

As has been the case since we organized our 2012 fund, the 2016 fund will have five investing partners: Brad, Fred, Albert, Andy and me. I’m leading the first investment, which we expect to announce in July. Andy is in discussions about a possible second investment. It will take us approximately three years to identify 20-23 companies for the new fund. Since the firm has more than 60 active companies today, we will likely have a slower investment pace than the last two funds, but who knows?

There is one change with the new fund. In past funds, the key man provision in our fund formation documents was focused on USV’s founders Fred and Brad. This provision gives limited partners a second look at a fund if named members of the general partner become inactive. In the 2016 fund, the provision focuses on Albert and Andy. They will take an increased leadership role and lead more investments in this fund cycle. Fred, Brad and I will be active in all investment decisions for this fund, but it seems time to acknowledge the leadership role that Albert and Andy have been playing and will play at USV going forward.

We all love what we do and the partnership we have developed, but last summer Fred, Brad and I independently concluded it was time to cut back a bit as we discussed the next fund and examined our gray hairs. VC requires long time horizons, at least ten years and often fifteen or more. We still have four companies remaining in the 2004 fund and 15 in the 2008 fund.

We have been talking to our limited partners, companies and colleagues privately about this transition for about a year, but last month at our CEO summit we learned there continue to be unfounded rumors that Fred and maybe Brad were retiring. This amused us greatly since on most days we share email threads almost every hour and the firm’s activity level on investment, network and policy matters has never been higher.  You can find Fred’s thoughts on this topic at avc.com.

Each investment fund is an adventure as we build a portfolio and help our companies succeed. As anyone reading this post knows, it's an exciting time to be in this line of work. We are grateful to everyone who supports us. USV 2016 is now open for business and we are committed to managing it until it is fully liquidated, almost certainly until 2030 or beyond.

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