Over more than 14 years of venture investing, Sunil Dhaliwal often heard the same refrain from entrepreneurs about their motivation for launching a startup.
“They would say it was just so obvious there was this thing that needed to be done, and they just had to do it,” says the former Battery Ventures general partner. But only recently, Dhaliwal says, did he begin applying that principle to his own career path.
This week, Dhaliwal is publicly launching a new venture fund, Amplify Partners, that will invest in a sector he calls Infrastructure 2.0. The fund, which will operate out of the Boston and Silicon Valley metro areas, will make initial investments of $50,000 to $1.5 million in software-driven businesses mostly geared to enterprise IT customers.
Dhaliwal is sole managing partner in the fund, and will run it alongside principal Farah Giga, a former Valhalla Partners principal, and a group of between 15 and 20 infrastructure entrepreneurs and executives who will be called “Venture Amplifiers.” The Amplifiers will assist in diligence, mentor portfolio company entrepreneurs, and share in what Dhaliwal says will be “a significant piece of our carried interest.”
So far, Amplify has already backed a few companies, including Continuuity, a developer of tools for building big data apps, and Fastly, a content delivery network, as well as Wibidata and Datadog, which offer applications for analyzing large datasets. One more portfolio company, Tracelytics, which developed application performance management tools, sold to AppNeta, another venture-backed company in the space, in June. Others are in stealth mode.
Dhaliwal says he decided to launch the fund because he saw a gap in market for early stage infrastructure companies. There were plenty of promising teams that had developed potentially useful technologies but needed resources to help turn them into marketable products. An added advantage, he says, is that infrastructure companies have gotten cheaper to build.
“People equate infrastructure with being capital intensive… But the actual cost to go from starting up to shipping product has gone down dramatically,” he says. These days, for instance, the cost of sales and marketing is lower because startups can offer a downloadable product with some features that prospective customers can try out. Then, sales teams can focus on reaching out specifically to those who have already shown interest in the application.
Additionally, “Infrastructure 2.0” does not have the costly, risky and logistically challenging aspects of a hardware play. Although many businesses do have a hardware component, it’s usually off-the-shelf commodity hardware, with the real value in the software.
Amplify is aiming to raise $40 million, and has raised $16 million to date, according to a securities filing. Dhaliwal did not name limited partners, but said they include IT infrastructure executives, financial industry veterans and institutional investors. Some of the fund’s Venture Amplifiers are also investors.
Photo courtesy of Amplify Partners.