Over five years ago USV launched its first “Opportunity Fund” - a pool of capital meant as a complement to the core activities of our early stage funds. A few years thereafter, in 2014, we raised a second Opportunity Fund. Both of those funds have been continuously active. In light of making our first investment in our 2016 early stage fund, we thought this would be a good time to take a look back (and forward) at this investment strategy.
To date, the Opportunity Funds have invested in 15 companies in sectors such as financial technology, infrastructure, marketplaces and consumer services, located in both North America and Europe. The initial investments have ranged from $7.5 to $15 million, and we have made follow-on investments in many cases. About two-thirds of these investments were in companies in which we had previously invested out of our early stage funds.
The Opportunity Funds give us the ability to invest in more developed companies where we think our perspective can add value to the business. It also gives us flexibility to invest in companies that we missed in the early stage. As we wrote in 2011: “We hope you'll think of USV as stage-agnostic, highly-focused investors who can add value to your company.”
Importantly, these funds are designed to operate in a way that complements our core activities.
The first way they do this is by letting us support portfolio companies across a wider range of stages and at higher valuations than we can with our core funds. An example of this is the round we recently led for Foursquare.
The second way is by developing relationships with entrepreneurs over longer periods of time, which in ultimately results in an investment opportunity outside of a bidded investment round. A good example of this is Cloudflare, which was led by Brad.
The third way gives us a very real opportunity to invest in companies that squarely fit within our thesis but we missed during their earlier stages. Lending Club and Realty Shares fit into this bucket.
In many of these examples, founders felt that USV's approach and experience was relevant and we structured a deal outside of the usual fundraising process that worked for both sides.
We have plenty of capacity in our existing Opportunity Fund and are actively looking for new investments. If you think this focus is relevant to your business, please reach out to us.