Clavier, the firm’s founder and managing partner, said the fund was oversubscribed and has invested in 23 companies so far with money from its first and second closings. It is a substantial boost in size from SoftTech VC’s $15 million second fund raised in 2007.
The goal is to take larger stakes in portfolio companies and be able to make more follow on investments in startups that are taking off, he said. “We’re just aligning our interests in terms of work and ownership.”
SoftTech will add a new partner this year.
The completion of the fund will be announced in a Securities and Exchange Commission filing on Thursday afternoon. The fund, SoftTech VC III, had a first close on $14.5 million in January 2011. At that time, it had a target of $35 million.
In November, Clavier announced that he closed on $35.4 million of a fund with a target of $50 million. The final fundraising leg to $55 million went quicker than the earlier ones. “We were actually over subscribed” and “we decided 55 was really it,” Clavier said.
In the past several years, micro VC funds have spread in number and velocity. Clavier, who started his firm in 2004, is one of several managers who have seen their firms grow in maturity and stature.
“Jeff has the credibility to lead deals and his new fund will allow him to build a strong portfolio with meaningful ownership in great companies,” said Michael Kim, a limited partner in the fund and a managing partner at Cendana Capital.
A Scale Up Strategy
The fund’s strategy is to invest an average of $400,000 in a company, and sometimes a lot more, with the goal of owning a 10% stake if SoftTech is the lead investor and a 5% stake if it is not. With fund II, the firm’s typical ownership stake ranged from 1% to 3%, though on occasion it went as high as 8%.
The fund will try to invest $20 million to $25 million in about 60 companies over three years and reserve 1 to 2 times its initial investment to place selectively with winners. With the new fund, Clavier expects to do follow on financings for about 50% of companies receiving an initial investment. With fund II, about a third of companies will receive or have received a follow on.
One example of SoftTech VC III investment is Fab, which received a $250,000 seed investment. The firm added another $700,000 in follow-on rounds. Also in the portfolio are Fitbit, BetterWorks, Movieclips, Gigwalk and Bionic Panda Games.
Institutional LPs Sign Up
Institutional money played a big role in the new fund. Of the $55 million raised, $40 million came from institutional funds of funds, including Stepstone Group, affiliates of AMG National Trust Bank, Cendana and Industry Ventures. Family offices, and Internet entrepreneurs and investors also participated.
Clavier says so far fund II has invested in 65 startups and had a dozen exits, including Milo, which was acquired by eBay; Tapulous, which Disney bought; and, Goodrec, which became Mob.ly and was purchased by Groupon. The first fund has had nine exits so far for a total consideration of $380 million, he said.
In terms of industry sectors, fund III is focused on mobile, e-commerce and software as a service companies. It also will require hiring an additional partner sometime this year. Clavier says he has a few people in mind, but that no one has been brought on board yet.
He also acknowledges keeping his eye on a longer term horizon. A fourth fund is likely toward the end of 2013, he says, with the assumption it will be similar in size to the third fund.