The Daily Startup: Small VC Funds Gaining Support of Limited Partners - WSJ

The Daily Startup: Small VC Funds Gaining Support of Limited Partners - WSJ http://blogs.wsj.com/venturecapital/2014/09/30/the-daily-startup-small-vc-funds-gaining-support-of-limited-partners/

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Limited partners are actively returning to venture capital and many are looking beyond the industry’s giants. “I think this is the first year that LPs have realized that you can make a lot of money in small venture funds as well,” said Hans Swildens, founder and CEO of Industry Ventures.

The firm has closed on $170 million, more than twice the size of its previous fund, for a fund of funds targeting venture capital funds of less than $250 million. That’s another sign of rising investor interest in these smaller pools, Russ Garland reports for Dow Jones VentureWire.

“Micro-VC” funds, or funds totaling $100 million or less, especially are on the rise, with 62 debut funds in that range closing in 2012 and 2013, and 19 closing in the first half this year. Both those figures are the highest recorded.

Mr. Swildens said he’s seen an explosion in the number of small VC funds, which, if managed properly, can deliver great returns. “There’s a subset of these managers that have just done unbelievably well,” he said.

With so many such funds forming in the last couple of years, however, chances are that only a select few will provide hoped-for returns. The pension funds, endowments, family offices and individual investors that are jumping into the micro-VC game will have to choose carefully to make sure they don’t get stuck with sub-par performers.

ALSO IN TODAY’S VENTUREWIRE (subscription required):

Kleiner Perkins Caufield & Byers is leading a $40 million Series C investment in San Francisco-based Remind, formerly Remind101, an app that enables teachers to communicate with students and families through a mobile app.

Foko, a Canadian startup whose software lets corporate workforces internally share photos, has hired former Blackberry executive Marc Gingras as its CEO and has raised $450,000 in seed funding from several angel investors.

AnyPresence, which provides a secure platform for enterprises to build custom mobile apps for both internal and external uses, has raised a $6 million Series C round from CNF Investments, Citrix Systems, Kinetic Ventures and Grotech Ventures.

Pristine has landed $5.4 million in Series A funding for a Google Glass-based hardware-software system that will enable doctors, emergency medical technicians, nurses and others to collaborate on patient care without interrupting work flow, the company said.

LifeBond, an Israeli company in clinical trials with biocompatible devices for tissue repair, has raised around half of a $25 million Series D from existing investors including Pitango Venture Capital, Giza Venture Capital, Aurum Ventures MKI and GlenRock Israel.

Cowboy Ventures is raising its second fund, targeting $55 million for Cowboy Ventures Fund II LLC, according to a regulatory filing. The Palo Alto, Calif.-based firm previously invested out of a $40 million seed fund.

(VentureWire is a daily newsletter with comprehensive analysis of all the investments, deals and personnel moves involving start-ups and their venture backers. For a two-week trial, click here.)

ELSEWHERE AROUND THE WEB:

Peter Thiel: The World Hates Tech. Forget all the buzz over driverless cars; the days spent waiting in line for the latest iPhone; the drones delivering medicine. Tech investor Peter Thiel says that, fundamentally, our society hates tech. “We live in a financial and capitalistic age,” he told The Wall Street Journal. “We do not live in a scientific or technological age. We live in an age that’s dominated by hostility and unfriendliness towards all things technological.” Silicon Valley, he said, has people who believe in technology and scientific innovation, while much of the rest of the U.S. doesn’t.

Google Capital Gets Busy. The growth-stage vehicle backed by U.S. Internet giant Google co-led a Series C round totaling $38 million into a Suzhou-based business called InnoLight Technology, a manufacturer of high-speed optical transceivers that are used by computer servers, the WSJ’s Sonja Cheung reports. Until now, Google Capital‘s investments have been centered on the U.S., with existing portfolio companies including online survey startup SurveyMonkey and financial-services business Lending Club…on Monday, Google Capital also announced it had taken part along with Tiger Global Management and Susquehanna Growth Equity in a $75 million growth round for Credit Karma that valued the personal-finance tools company at more than $1 billion, the WSJ’s Lora Kolodny reports.

Israeli VC Firm Magma Raises $150 Million Fund. Israeli venture capital firm Magma Venture Partners closed a $150 million fund for early stage, Israel-based technology companies, the WSJ’s Orr Hirschauge reports. Magma was a backer of transport navigation app Waze, sold in 2013 to Google for more than $1 billion.

Lyft Defies Legal Threat in L.A. With New Carpooling Service. Ride-sharing startup Lyft is officially expanding its new carpooling service to Los Angeles, seemingly defying the Los Angeles district attorney, who last week joined with San Francisco’s district attorney in alleging that ridesharing services are breaking the law and misleading consumers, the WSJ’s Douglas MacMillan reports.

Mayfield’s Navin Chaddha on ‘Frothy’ VC Environment. With Mayfield Fund this week celebrating its 45th anniversary, Managing Director Navin Chaddha talked to the WSJ’s Deborah Gage about the changes he sees in the venture industry and how his firm avoids following the herd.

Downtown Las Vegas Is An American Techtopia. Since buying 60 acres and promising a $350 million investment in 2012, Tony Hsieh, the founder of Vegas-based shoe-sales site Zappos, has turned the downtrodden, recession-hit heart of Las Vegas into an experimental startup city, re/code’s Nellie Bowles reports.

The Way to Become the Next Big Thing. Tech entrepreneurs and investors are always looking for the next big thing. Cheryl Cheng, partner of BlueRun Ventures, says in a WSJ Accelerators blog post that people cannot always articulate what problems they need solved, but consumers are willing to part with a lot if your product solves it.

Smoking Gun on Startup Burn Rates. After Bill Gurley, Fred Wilson and Marc Andreessen caused a stir in the venture world by expressing concerns about how quickly many startups were burning through their cash, Pitchbook took a look at the data and concluded that the VCs are on to something.

Write to Zoran Basich at zoran.basich@wsj.com. Follow him on Twitter at @zoranbasich

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