Menlo Ventures, like many other Silicon Valley venture capital firms, has at times looked for big returns from spotting early-stage companies with great promise. But as it launches a new $500 million fund, it plans to hunt for companies that are further along, and seem poised to take off on a growth curve.
Those early-growth stage companies can suffer from a funding gap, because many venture capital firms are pouring money instead into either fledgling startups or late-stage companies that need financing rounds as big as $200 million to aim at “mega-growth,” Menlo Ventures explains in an announcement of its new Inflection Fund today.
The 15-year-old VC firm plans to help fill the funding gap, encouraged by its experiences investing in companies such as Uber, Betterment, Chime, and Everlaw when they were at that middle stage, ready to break out.
“Inflection investing is backing companies that show early signs of enormous potential but lack the absolute scale of runaway winners,” Menlo Ventures partners Tyler Sosin and Venky Ganesan write in a blogpost about the new fund. “It is the juncture where a company’s potential is still unbounded, but the business has taken shape and can be evaluated through the sober lens of data and financial analyses, customer feedback, mental models and first principles.”
Ganesan and Sosin will be among the partners running the Inflection Fund, along with Mark Siegel, Matt Murphy, Shawn Carolan, and Steve Sloane. The fund’s investments will track with the venture capital firm’s existing interests in artificial intelligence, cloud infrastructure, financial technology, marketplaces, mobility, and software delivered as a service, by subscription.
The Menlo Park, CA-based VC firm plans to make investments of $20 million to $40 million to help companies scale up their teams and carry out plans for wider adoption of their products. Menlo Ventures will be looking for companies that already have “a beloved product,’’ annual revenue between $5 million and $10 million, rapid growth, and a strong founding team. The Inflection Fund is the VC firm’s 15th fund.
Photo of Menlo Ventures team courtesy of Menlo Ventures
