Over the last decade, late-stage and crossover funds have faced sharper elbows from a wider number of non-traditional market participants that write checks to maturing but still-private companies. A lot of these firms have done well as their portfolio companies begin to to trade publicly or get acquired. Still, it’s harder every year to stand out from the pack.
That kind of heated competition may explain in part why Technology Crossover Ventures, which closed on a $4 billion fund in January of last year, just raised a separate, $460 million fund that will focus exclusively on Series A, B, and C-stage companies. Called its Velocity fund, the idea is to “help founders of innovative companies as they shift from product-market fit to scaling up,” says the now 27-year-old firm.
The apparent thinking: maybe it improves the firm’s odds of backing the best later-stage companies if it can start working with them a little earlier. “We wanted to make sure companies have a full-stack approach,” as General Partner Matt Brennan, who co-leads the fund with another general partner, Gautam Gupta, explains it. “Now they can get early capital through a dedicated team effort fund and LP base, but at the same time, as they grow, they have a product that grows with them.”
Already, the Velocity fund — which aims to invest checks of between $10 million and $30 million into rounds that are between $15 million and $50 million in size — has invested in two companies: BenchSci, a company that’s using artificial intelligence in an effort to increase the speed and quality of biomedical research, and Passport, an international shipping carrier built for e-commerce brands and marketplaces.
The investing team, which also includes three other investors who have joined TCV in the past year from venture growth firms, intends to invest the fund in both consumer and enterprise startups and maybe even lead TCV into its first crypto deal.
Says Gupta — who joined TCV last year and who long led his own startup, the subscription snack company NatureBox — “We’re earlier in the learning curve on crypto than crypto native funds certainly, but we’re absolutely spending a lot of time looking at opportunities across both consumer and B2B.”
TCV has “backed a lot of the great web 2.0 companies,” he adds, “so I think the approach we’re taking is [asking], ‘Where are the amazing value propositions being built in a web3 world, and how can we leverage our resources and what we’ve learned in web 2.0 to help those companies accelerate?’”
TCV has been on a roll. In 2021, 14 of its portfolio companies became publicly traded, including through IPOs, direct listings, and mergers with blank-check companies. Among the best known of TCV’s deals over the years — and it has now invested in roughly 350 companies altogether — are Airbnb, EA, Peloton, Netflix, Spotify, Facebook, and Zillow.
According to a recent report in the WSJ, in addition to this new fund, TCV is already already out raising another flagship fund as as follow-up to the $4 billion vehicle it raised last year, which was its biggest ever.
This time, according to the report, TCV is looking to raise up to $5.5 billion in capital commitments.