SoftTech VC, the seed-stage firm started by technology angel investor Jeff Clavier, has closed on $85 million for its fourth fund.
The new fund is substantially larger than SoftTech’s last one, a $55 million vehicle raised in 2011. Clavier said the rationale for scaling up is to enable SoftTech to take larger stakes in companies and to have resources to participate in follow-on rounds.
“The thing that happened in the last 12 to 18 months is the median size of the Series A has increased,” he said.
A median Series A round was about $6 million a few years ago, but that number has crept up, as some fast-growing companies are attracting much larger sums, often exceeding $10 million. The firm plans to make initial investments of $500,000 to $1,000,000 in portfolio companies and to take ownership stakes of between 7 percent and 10 percent.
SofTech is known for its investments in consumer-facing technology companies. It was an early backer of device maker Fitbit, financial software provider Mint and ticketing app Eventbrite.
In the last few years, however, the firm has been putting more money into business-to-business startups. It has already made a few investments out of Fund IV in both business- and consumer-facing startups, including DocSend, a document sending platform, Niche, a marketing platform for social media rising stars, and Panorama Education, an analytics provider for schools.
Over the past 10 years, SoftTech has invested in close to 150 companies. In a given year, the firm sifts through more than 2,000 startups and backs about 15, Clavier said. It’s had a good track record. Fund III, the only one with performance numbers available, had returned a multiple of 1.49 on invested capital, including unrealized gains, according to San Diego City Employees’ Retirement System data published by Bison, which tracks public performance data for VC and PE funds.
For its new fund, SoftTech changed its limited partner composition. Historically, fund-of-fund investors accounted for the vast majority of committed capital. With Fund IV, fund-of-fund investors account for less than half of committed capital, with pension funds and family offices picking up a greater share. LPs include Cendana Capital and Northern Trust.
SoftTech started out as a one-person firm, with Clavier raising his first institutional fund of $15 million in 2007. For Fund III, the firm added Charles Hudson, a partner, and Stephanie Palmeri, a principal, both of whom are remaining on board for the new fund.
Photo of Jeff Clavier courtesy of SoftTech VC.