Sapphire Ventures closes $1 billion fund to back startups

September 14, 2016 12:07 PM EDT

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By Heather Somerville

SAN FRANCISCO (Reuters) - Venture capital firm Sapphire Ventures has closed a $1 billion fund to invest in technology startups, becoming the latest investment firm to join a record-breaking clip of venture fundraising.

Sapphire Ventures, which in 2011 spun out of technology firm SAP but still relies on that company as its sole funding source, has backed high-profile startups such as Square, Box and Fitbit and plans to use the new fund to invest in growth-stage technology startups, the firm said on Wednesday.

The $1 billion pot is Sapphire Ventures' third and largest fund and nearly doubles the assets the firm has under management to $2.4 billion.

"It's been a good five years," said Nino Marakovic, chief executive and managing director of Sapphire Ventures.

Venture capitalists raised $8.8 billion in the second quarter, down from a whopping $14 billion in the first quarter but still keeping this year on track to be the biggest for VC fundraising since 2001.

Sapphire Ventures invests in the United States, Europe, Israel and emerging markets including Brazil. It has seen 38 exits in its portfolio, including 15 initial public offerings.

But the firm has felt the lackluster performance of the IPO market this year, which is off 55 percent from 2015, according to Renaissance Capital, a manager of IPO-focused funds. Two of the firm's investments, data and storage company Nutanix and electronic signature service DocuSign, have long delayed IPO plans.

Although it focuses on expansion-stage startups, the firm has started investing earlier in companies to avoid the high valuations that have ballooned at the later stage, Marakovic said.

"As the valuations have gotten steamier and heavier in the pre-IPO rounds," he said, the firm has joined earlier funding rounds.

(Reporting by Heather Somerville; Editing by Peter Cooney)



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