Venture capital firm Menlo Ventures has a new $500 million investment fund aimed at Series B and C funding rounds to help start-ups catapult into the bigger leagues.
These investments will be in companies that are past the early-stage Seed and Series A funding rounds, but not big enough yet for the mega-growth investments that typically see $50 million to $200 million rounds. The announcement of the new fund was made Wednesday via a blog post by Tyler Sosin, a partner at the Silicon Valley venture firm.
Sosin explained in his blog that companies at this stage of growth “show early signs of enormous potential but lack the absolute scale of runaway winners.” These companies are at the crossroads of their lifecycle and still need the additional funding to see if they really can reach their full potential, but typically find it hard to secure funding from the usual sources. Often, that’s because of costs connected with inherent growth risks or because many would-be investors prefer waiting until the later stages of the lifecycle. It’s the later stages where there’s less risk, as that’s when there’s more data available to fully prove both the business concept and the existence of a scalable model.
This stage of investing is one where Sosin said the firm has experience, given its past investments in on-demand car service Uber, mobile fashion marketplace Poshmark, factoring firm BlueVine, entertainment streaming service Roku, and fraud protection provider for online retailers Signify, to name a few. Menlo was also middle-ground investor in internet pharmacy start-up PillPack, which went on to be acquired last year by Amazon.com in a deal valued at $1 billion.
According to the blog post, Menlo Ventures will make Series B and C investments of between $20 million to $40 million in business areas such as SaaS, mobility, marketplaces, Fintech and AI, provided there’s a connection to large consumer and B2B markets. Criteria for the funding include companies with a “beloved product;” early product-market fit with more than $5 million in annual recurring volume, but less than $10 million; rapid growth of more than 100 percent year-over-year; early signs of efficient economics and payback; and a strong founding team.
Sosin will be on the investment team for the fund. He will be joined by fellow partners Matt Murphy, Mark Siegel, Shawn Carolan, Venky Ganesan and Steve Sloane.