Maven Ventures, a venture capital fund that made early stage investments in Zoom and Cruise, is launching a $65 million fund to feed off growing investor interest in taking small but very early bets on the next generation of technology companies.
Founder Jim Scheinman says limited partners flockto the fund because it bets on early stage startups other investors consider too risky. “You can either say, ‘I guess everyone else is right and we’re wrong’ and just shut it down or you can say, ‘We’re on to something and they just don’t see it yet,’” Scheinman says. Maven Ventures originally planned to raise $50 million for the third fund.
One reason for the added interest in Maven: realized and expected returns from its first two funds that include an early bet on self-driving startup Cruise and that continue to look better as video conferencing company Zoom charms public investors. The Palo Alto, Calif.-based firm says it has already returned nearly twice the money invested through its debut 2013 fund, which deployed $7.5 million. That fund’s shares in Zoom — still held — represent another 1.5x the entire fund. Maven’s Zoom stake from its 2016 second fund, which deployed $18 million, would currently single-handedly make back that fund, too. In a statement shared by Maven, its outside fund administrator said it marked Maven’s Net IRR, or internal rate of return, a key metric for assessing venture capital fund success that factors in time to exit, at 49.92% for Fund I and 46.47% for Fund II. (Historical average IRRs for early-stage funds are just over 21%; elite firms look to return 30% or more.)
It’s not just Zoom. Partners Jim Scheinman and Sara Deshpande are filling a gap in the investing landscape as capital migrate to ever-larger funds, from originally small early-stage shops like Felicis Ventures to large firms such as Sequoia or Andreessen Horowitz, both of which recently raised multi-billion-dollar funds. Compared to many investments by such firms, Maven’s bets are small. But like its $2.25 million investment in Zoom, which is now valued on the public markets at $22 billion, Maven’s small stakes can have an outsized impact for its investors. Its $750,000 investment in Cruise was worth millions when General Motors bought Cruise for a reported $1 billion in March 2016.
There are more micro VCs, funds with $100 million or less that tend to make smaller, early investments, than when Maven started six years ago. But as a group, they represent an increasingly narrow sliver of total venture investments. Last year, micro VC accounted for 15% percent of U.S. venture capital raises, down from 25% five years prior, according to Crunchbase News.