By Sarah McBride
SAN FRANCISCO (Reuters) – Ignition Partners said it had raised $200 million for a new fund, two years after a major restructuring that created a slimmed-down version of the 15-year-old firm.
The new fund, which Ignition said was oversubscribed, shows how much a few good investment successes can do to restore luster to a venture firm. In this case Ignition benefited from some good bets on enterprise-software firms.
Among them was Splunk, in Ignition’s portfolio since 2007, which raised $229.5 million in an initial public offering shortly after Ignition announced its restructuring. Cloudera, an Ignition investment since 2011, was valued last year north of $4 billion.
The firm plans to stick to early-stage investments in the $5 million range, said managing partner Nick Sturiale in an interview.
Increasingly, venture funds are diverging to extremes. The $1 billion plus funds that make investments at all stages of a start-up’s life lie at one end of the spectrum. At the other end lie niche funds of perhaps $250 million or less that specialize in earlier stages.
Sturiale believes investing at the niche end will help the firm do well even in the event of a correction in private markets, which are assigning outsized valuations for a growing number of later-stage start-ups. Those with valuations of $1 billion or more are dubbed “unicorns.”
“There’s going to be some pretty high-profile corrections in that group,” he said, adding that he is advising his portfolio companies to build up revenue as quickly as possible, but without relying overly on marketing dollars.
“Don’t buy revenue,” he said, arguing it leads to less committed customers. “That’s the ethos of the last three bubbles, buying revenue and buying crappy customers.”
Ignition’s new fund, $40 million bigger than the last fund it raised in 2013, comes amid a booming climate for raising venture cash.
Last month, giant IVP said it raised a $1.4 billion venture fund, while NEA raised a $2.8 billion fund. On the other end of the spectrum, Aspect Ventures, which specializes in companies that harness smartphone technology, said last week it raised an inaugural $150 million fund. (http://www.reuters.com/article/2015/05/14/venture-newfund-women-idUSL1N0Y439420150514)
Ignition Partners was founded in 2000 by former Microsoft <MSFT.O> and McCaw Cellular Communications executives. In 2007, just before the global economic crisis, it raised a $400 million venture fund along with a $275 million growth-equity fund.
(Reporting by Sarah McBride; Editing by Bernard Orr)