The fund sizes just keep getting bigger for Battery Ventures.
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The storied 37-year-old venture firm announced this morning it has closed two new funds worth a combined $2 billion.
The fund closures represent a 60 percent increase from the $1.25 billion raised almost exactly two years ago. (Over the past decade, its funds have been raised every two to three years.)
Specifically, the firm is announcing today it has closed on Battery Ventures XIII, a $1.2 billion investment fund, and Battery Ventures XIII Side Fund, a companion vehicle capitalized at $800 million.
According to Crunchbase, Battery Ventures has been steadily increasing its fund size over time, raising a total of $5.8 billion since 2010. Battery Ventures XII closed in February 2018, raising $800 million while Battery Ventures XII Side Fund raised $450 million at that time.
I hopped on the phone with Michael Brown, a general partner at Battery Ventures, to find out more details. He emphasized that the side fund is not an opportunity fund. Rather, it invests alongside the main fund in later-stage growth investments and buyouts.
“The side fund is essentially a co-investment vehicle for later-stage deals and larger checks,” Brown told Crunchbase news. “It doesn’t cherrypick investments.”
With 49 investment members (including 10 general partners), Battery Ventures is one of the busiest global venture firms out there today. It says its staff operates as “one global team” out of offices in Boston; San Francisco; Menlo Park; New York; London; and Herzliya, Israel, outside Tel Aviv.
Historically, the company’s primary focus is on investing in B2B software companies. Beyond that, it backs companies in sectors such as enterprise IT (including cloud computing, artificial intelligence and cybersecurity), online marketplaces and industrial technology.
Since its 1983 inception, Battery says as of Sept. 30, 2019, it had invested in 426 companies globally, excluding seed deals, “resulting in 61 total IPOs and 167 M&A events.” The firm declined to provide more specifics outside of directing me to its website. But according to Crunchbase data, one of those recent exits includes Intel acquiring chipmaker Habana for $2 billion in December. Also last year, Phoenix-based health care software startup WebPT was picked up by Warburg Pincus, and Fastly went public at a valuation of $1.5 billion. Other previous high-profile exits include online home goods retailer Wayfair going public in 2014 and Glassdoor being acquired by Japan’s Recruit Holdings for $1.2 billion in 2018, according to Crunchbase.
The firm’s approach is multistage; backing companies at “all stages of maturity.”
“We invest in companies in the pre-product, pre-revenue stages all the way through to very large companies,” Brown told me.
Battery also prides itself on diversity, Brown said, in terms of geographies in which it invests, stages and sectors. For example, it likes backing companies outside the coasts here in the U.S., and it’s also putting money into European startups. Within software, it backs companies “ranging from applications you and I would use into the infrastructure layer,” Brown added.
“Within that software stack, we like industries such as health care IT and fintech,” he said. “Overall, we think B2B software, where we spend most of our time, has a lot of opportunity ahead of it.”
When it comes to sourcing deals, Battery “does a lot of research internally” and then talks to research analysts and founders, and attends conferences.
“We have created a holistic approach to what’s going on in the market so we can make early bets,” he said. “So while some of our sourcing is data-driven, at the end of the day that usually results in our getting on the phone or on a plane to talk to entrepreneurs about their businesses, and how we can partner and help them grow.”
LPs are a mixed bag of investors, primarily U.S.-based, according to Brown. They include public and private pension funds, university endowments, financial institutions and fund-to-fund investors. Most LPs in the latest fund have invested in multiple prior ones, Brown said, with “some new ones” participating.
Battery also announced that, in conjunction with the new fund, Zack Smotherman has been promoted to partner. Smotherman first joined Battery in 2013 and focuses on later-stage investments in the industrial technology sector.
Illustration: Li-Anne Dias
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