You’ll have to excuse the GPs of Jafco Ventures for smiling. They’ve had a good run since the fall.
In September, the 10-year-old firm scored its biggest exit ever when endpoint security provider FireEye went public. Around the same, it notched one of its largest M&A exits when Twitter purchased mobile ad network MoPub. Then in April, the firm announced that it has closed its largest fund to date, raising $260 million for Jafco Ventures V.
The new fund marked the first time the Palo Alto, Calif.-based Jafco has actually hit the fundraising trail. For prior funds, the firm had just one limited partner, Tokyo-based parent Jafco Co, Japan’s largest venture firm. Jafco Co, which has a number of mostly Japanese limited partners, launched the U.S.-based venture arm 11 years ago to tap into U.S.-based growth tech companies.
But while the solo LP model has worked well so far, the Silicon Valley-based partners decided it made sense for the latest fund to broaden its investor base.
“We focus more on Series B and Series C, and the size of the initial checks we were writing was getting bigger,” said Joe Horowitz, Jafco Ventures’ managing general partner. Partners wanted to continue their longstanding practice of leading most financing rounds in which they participate. To do that, they needed a bigger fund.
The firm raised $160 million for Fund V from outside limited partners, while $100 million came from Jafco Co.
New LPs are predominantly foundations, endowments, family offices and fund-of-funds investors. They include the Mellon Family Investment Co, Greenspring Associates and Industry Ventures. While partners originally planned to raise $250 million, they extended the cap a bit to fit in an additional LP, Horowitz said.
Horowitz said the fundraising experience was mostly positive. Limited partners were more skeptical of the venture asset class a few years ago, when IPO demand was weak and the overhang from the dot-com bubble years weighed more heavily.
Today, with IPOs picking up and venture distributions on the rise, institutional investors are more receptive.
As for Jafco Ventures itself, partners declined to disclose fund-specific return multiples. However, Horowitz said that the firm’s four prior funds have all posted positive returns. About a third of portfolio companies across all the funds have had exits with favorable returns.
Photo of Jafco Ventures team (left to right) Jeb Miller, Tom Mawhinney and Joe Horowitz, courtesy of Jafco Ventures.