New venture capital funds are still getting money. For example, in the last month, Runa Capital, Lerer Hippeau, Razor’s Edge Ventures, First Star, OurCrowd, Northzone, Janngo Capital, and Kapor Capital all announced new funds.
Now it’s Scale Venture Partners‘ turn. They just announced that they have raised $900 million for their eighth fund, which is also their largest since they started in 2000. Partner Rory O’Driscoll told TechCrunch that the money was raised in 120 days over the summer.
The firm was one of the first investors in some legacy SaaS companies, such as Box, DocuSign, HubSpot, RingCentral, and Bill.com. It is known for backing enterprise software. It also puts money into newer businesses, such as BigID, Dusty Robotics, and Honeycomb.
O’Driscoll says that the new fund comes at a good time for the company, which has raised a new fund every two years since 2016.
“One of the goals of the fund is to get back to a more normal two-and-a-half to three-year cycle,” he said. “Our pace has been very steady, but the size of the deals wasn’t that great.”
Scale is still making investments from its seventh fund, and partner Alex Niehenke told TechCrunch that the new fund’s money will start to be used in early 2023. He also said, “The truth is that the speed at which we deploy is not always predictable.” So, the company wanted to raise its fund as soon as possible so that if entrepreneurs pitched the company in the fourth quarter, the fund would already be closed and ready to go.
Both new and old investors put money into Fund VIII. O’Driscoll said that limited partners were on board with the new fund, but they wanted to make sure that Scale didn’t raise more money than it could successfully use.
He also said, “Fund size is the enemy of fund performance.” “Our goal for this fund is to have more than 20 deals and good diversification in terms of both fields and time.”
He went on to say that the firm’s sixth and seventh funds were spread out over two years, but it was making fewer deals. He said, for example, that Fund VII still has four investments left and that the last one will be put to use sometime in early 2023.
O’Driscoll said, “This fund is the right amount to get back to achieving our goals and not to do something else.”
Niehenke said that the new fund hasn’t been put to use yet. He did say, though, that the money would go to the cloud and SaaS software companies in their Series A and Series B stages, much like Scale’s other funds.
But he and O’Driscoll say that cognitive applications are “the next generation of software companies,” and that’s where a lot of the money will go. Over the past five years, the company has seen “a new wave” of cognitive apps. The scale will continue to invest in enterprise technology and cloud software, but apps are “another layer on the cake,” Niehenke said.
He also said, “We’re not giving up on the cloud.” “In a lot of ways, cognitive applications just take that a step further. We invest over the next ten years, so when we think about where the next ten years will be, we see that more and more of our deals are centered on cognitive applications.
The fund will be run by O’Driscoll, Niehenke, Stacey Bishop, Andy Vitus, Ariel Tseitlin, and Jeremy Kaufmann and Eric Anderson, who was just made partners. Sam Baker was also made a principal, Noah Gross and John Gianakopoulos were made vice presidents, and Javier Redondo became a principal at Scale.