Scale Venture Partners has closed a $400 million fund. It has participated in a known total of 195 venture deals, leading in 76 of those rounds, according to Crunchbase. The firm told Crunchbase News that its assets under management currently amount to about $1.8 billion.
Scale Venture Partners was formerly part of Bank of America’s venture capital arm, but it spun out as an independent entity for its Fund III. After that, the firm focused its investments on business software technology. Notably, the VC firm led DocuSign’s $27 million Series C in December 2010 and participated in the company’s $85 million Series E in 2014. Scale VP was also an investor in Box. With its new Fund VI, the firm plans to invest in technology companies leveraging artificial intelligence.
“I do think there’s an AI euphoria that’s pervaded the current dialogue that’s resulted in the explosion of companies claiming to be built on AI that simply won’t survive.” Rory O’Driscoll, a partner at SVP who also serves on Box and Docusign’s board, told Crunchbase News in an email. But while he believes that hype exists, he says Scale VP focuses on funding viable companies based on certain criteria:
“To me, the key characteristics that nearly all successful AI companies share are that they: address well-defined challenges and solve specific, discrete problems; work with large data sets; quantify how AI improves a product or business; match AI to value (they’re monetizable); are solving problems where fallacy is acceptable (meaning, the 1% of the time that the AI gets the answer wrong, it’s not a deal breaker or life threatening); and have a go to market strategy that focuses on the people who benefit (not those who stand to lose their jobs).”
The group’s recent investments include startups from insurance to translation to security. The firm participated in Root Insurance’s $51 million Series C, and it was also a lead investor in enterprise security startup Big ID’s $30 million Series B in late June 2018.
“ScaleVP’s investment focus is on companies that have demonstrated product-market fit and are early in revenue,” O’Driscoll told Crunchbase News. He added that 84 percent of Scale VP’s investments for Fund V were in Series A and B ventures, and while the firm does not have a minimum revenue threshold, O’Driscoll said it prefers companies that “have a few million run rate and are looking to accelerate their go-to-market execution.”
As far as the size of individual investments, O’Driscoll explained that Series A and B investments tend to stay within a particular range.
“We’ve found that a $5-25 million investment tends to be the range that most Series A and B business software companies, including AI-powered technologies, need at that stage,” O’Driscoll wrote.
In addition to its fund, Scale Venture Partners is launching a beta version of its Scale Studio platform. The open-source platform will allow startups to compare important benchmarks and metrics, including Scale’s magic number and growth persistence, to the growth strategies of other private companies.
“It allows companies to pull relevant quarterly metrics like growth rate, sales efficiency, customer retention, and OpEx benchmarks like sales and marketing spend as a percentage of revenue,” O’Driscoll explained.
With the platform, Scale VP is aiming to provide private startups the ability to track and scale growth.
“Traditionally, annual planning processes are an exercise in uncertainty and politics, Scale Studio brings increased rigor to this process,” O’Driscoll wrote. Further, he sees the Scale Studio as a tool that companies will be able to incorporate into their yearly planning processes.
Illustration Credit: Li Anne Dias
Editorial Note: Scale Venture Partners informed Crunchbase News that its previous AUM was $1.2 billion. The article has since been updated to reflect its current AUM of $1.8 billion.