Emergence Capital Partners announced a $335 million fourth fund on Wednesday along with a shift in investment strategy to earlier Series A and Series B companies.
The new fund – Emergence Capital Partners IV – is a significant step up from the firm’s $250 million third fund, raised in 2012. Strong investor interest driven by the firm’s success with such deals as Veeva Systems led the fund to exceed its initial $300 million or so target.
“It was just impossible to keep it at that level,” said General Partner Gordon Ritter, who added that the fund could have been much larger.
“We don’t want to plan on this environment continuing forever,” he said. “Our goal is to stay focused and stay right sized.”
With the new fund, Emergence will shift its investment focus to slightly earlier deals and write larger checks.
The firm will continues its focus on Series A and Series B rounds, but will look for companies earlier in their development, Ritter said.
“In an environment like this, you want to carefully find early-stage opportunities,” he said. “If the market corrects, you don’t need these companies to do well for five to seven years.”
Yet the new fund plans to put more money to work in each company. The firm’s typical first check size will rise to between $5 million and $10 million compared with the $4 million to $7 million of the previous fund.
It will nonetheless stay focused on the enterprise and, in particular, fast moving pockets within enterprise cloud. This includes what Ritter calls the industry cloud, where applications such as those that support “customer intimacy” help businesses better understand their clients. It also includes mobile for the enterprise and next generation collaboration, where Emergence has investments such as Zoom.
The new fund will be managed by general partners Ritter, Jason Green, Brian Jacobs, Kevin Spain and new partner Santi Subotovsky.
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