Friday Letter: Opportunity funds attracting more

The parade of opportunity funds closures continues in venture, as Dawn Capital, SOSV and others see advantages to the strategy.

The year of the opportunity fund is continuing to roll along.

Last month, we reported on the rise of opportunity funds (read it here), a collaborative effort by the staff of Venture Capital Journal. The analysis piece explores how rising valuations and other factors are giving lift to the alternative strategy of opportunity funds as more early-stage venture firms add an opportunity fund to their suite.

Since we wrote that story, the examples of opportunity funds raised or seeking to raise worldwide have only increased.

One example came yesterday, as London’s B2B software investor Dawn Capital announced the close of its second opportunity fund. Its first, a $125 million effort raised in 2019, has already been deployed.

Foundation Capital, meanwhile, is in registration for its 10th main fund, along with its third Leadership fund, which serves as the firm’s opportunity vehicle. The fund seeks to raise $300 million, based on a regulatory filing.

In addition, Toronto’s Golden Ventures in late June secured $20 million for its first opportunity vehicle alongside its fourth main fund, which closed at $100 million.

Princeton, New Jersey-based venture firm SOSV in mid-June has closed its inaugural select fund at a hard-cap of $100 million. It is the early-stage venture firm’s first vehicle designed to invest in Series B rounds and later, exclusively in its existing portfolio.

Sean O’Sullivan, managing partner at SOSV, told me the marketplace is hot right now and the fund came together quickly during the pandemic.

He added that SOSV portfolio companies raised $1 billion in follow on rounds in the past year. Many of these include mega-rounds of $100 million or more, such as for Perfect Day, Upside Foods and Ushopal. Formlabs raised a $150 million growth round in May led by SoftBank that valued the company at $2 billion.

“We want to get a piece of that,” O’Sullivan said.

And that sentiment, shared by others, will no doubt continue to fuel opportunity funds.

Let me know what you think, and feel free to drop me a note at agoldfisher@buyoutsinsider.com.