Venture firm Lead Edge Capital, which has backed companies such as Uber [UBER.UL] and Spotify, has raised its largest fund to date in the latest sign of the rush of capital flowing into private tech companies.
New York City-based Lead Edge Capital said on Thursday it has closed a $520 million fund to invest in software and internet startups. The new fund size is an 80 percent step-up from its previous fund of $290 million and is 10 times larger than its first fund, a $52 million pot in 2011.
The firm’s growing fund size is consistent with the broader trend in the venture industry of firms raising ever-larger funds and fundraising more quickly, as startups also raise ever-larger funding rounds and stay private longer, relying on venture capitalists and other private investors rather than the public stock markets for funding.
“Stuff is more expensive today than it was five years ago,” said Mitchell Green, the firm’s founder and managing partner. “There is a lot of money chasing too few deals.”
Increasingly, venture firms are competing against big mutual funds, sovereign wealth funds and SoftBank Group Corp’s Vision Fund, a nearly $100 billion investment vehicle, to invest in the hottest tech companies. The competition requires they have more cash available.
Lead Edge previously invested in ecommerce and internet giant Alibaba Group Holding, food-delivery service Delivery Hero and cybersecurity company Duo Security, which was acquired by Cisco Systems Inc for $2.35 billion. Uber Technologies Inc is its highest-profile investment that remains a standalone, private company.
Lead Edge was also an early investor in Bird, the controversial Southern California scooter company valued at $2 billion.
The Bird investment aside, Lead Edge tends to invest in later-stage companies that generally have at least $20 million in revenue, the firm’s partners said in an interview. Its strategy means it avoids the youngest and riskiest startups, so fewer of its investments go bust, but because Lead Edge invests when companies are more valuable, its returns can be lower than other venture capital firms, the partners said.
The new fund brings Lead Edge’s total capital under management to $1.5 billion. About 70 percent of the firm’s fund comes from wealthy individuals who include technology executives, entrepreneurs and dealmakers.