San Francisco-based investment firm Mainsail Partners announced it had opened an Austin office last year. But it got little use as new waves of the pandemic rolled in.
Now, as the firm announced its new $915 million fund on April 19, it also says it has moved into its downtown Austin office at 500 W. Fifth St. in earnest and has shifted nearly half of its team to the Texas capital.
Why Austin? The firm has already made an investment here, backing language interpretation software maker Boostlingo LLC with an undisclosed amount in 2021. And it has invested in three other startups in Texas: Centerbase in Dallas, FieldRoutes in McKinney and Resman in Plano.
Mainsail established its Austin office last year when co-founder and Managing Partner Gavin Turner, and operating partner and Chief Financial Officer Bill Salisbury moved to Austin. They were among several notable San Francisco Bay Area VCs to move to Austin in the past several years, a list that also includes Jim Breyer and Joe Lonsdale.
"I feel like Austin has the same sort of energy and opportunity that San Francisco felt like it had back in the mid-'90s when I moved there from New York," Salisbury said. "There are a lot of really smart people. There's infrastructure. There's clearly a strong software mindset and ethos. And it feels it has not yet overwhelmed the infrastructure in the sense that there feels like there's still an enormous opportunity for growth. All those resources are now coming together and will continue with the drive of a lot of smart, motivated entrepreneurs to do great things in the software industry. It really has that same feeling to me."
Investors in Mainsail's new fund include high-profile charitable foundations and endowments, though the firm declined to name any. This is its sixth fund since it was founded in 2003. It brings Mainsail's total amount raised to more than $2.2 billion. The firm writes checks of $30 million to $60 million for promising software startups. It has invested in about 60 companies to date.
Since it opened its Austin office, Mainsail's local presence has grown to 22 people, with about the same number of people in its San Francisco office. Four of the firm's nine partners are based in Austin, and five are based in the Bay Area. Salisbury said the firm looks at the two offices as equals, with neither necessarily being the headquarters.
"We've really got a very nice, even split between the two offices and we expect that to persist," he said.
Mainsail looks for growth when investing and to be the first institutional investor in a company. It is sole investor about 90% of the time, although it's open to partnering.
Mainsail's new fund and growing Texas office are coming online at a time when many venture capitalists and market observers are warning that startup valuations are falling and that more challenging times lie ahead. For Mainsail, a growth equity firm that backs bootstrapped startups with 40 to 60 employees and $6 million to $20 million in revenue, any belt-tightening has yet to be seen, said Michael Anderson, a partner at Mainsail.
"In that market, we haven't seen that change the valuations at all," he said. "And then looking across our companies and what we're seeing, we haven't seen any kind of slowdown at the moment. There's certainly a lot of people predicting that it may come but we haven't seen it yet."
Austin just recorded one of its biggest quarters ever for venture capital investment. Companies based in the metro reported raising $1.5 billion across 99 deals, the second-highest level seen in a three-month period locally behind only Q3 2021.
Anderson said Mainsail typically reaches out to founders, as opposed to taking pitches, and it scouts deals largely through referrals and industry events.
Austin-based Boostlingo, for example, landed an investment from Mainsail last August. In March, the company acquired VoiceBoxer, which is also in the language interpretation software business.
Salisbury said Mainsail's investments typically fuel new hiring, in addition to helping companies find key acquisition targets and make deals.
"We like to meet entrepreneurs, really, before they're ready to transact and get to know them and understand what the product is all about," he said.
Mainsail has put additional focus on investing in diverse teams in recent years, Salisbury and Anderson said.
"It really just starts with having a focus on it," Anderson said. "And then, over time, really trying to influence the companies we've invested in to create more diverse organizations themselves."
"Being a finance person, you can't really manage what you don't measure," Salisbury said. "So we've started measuring diversity over the last several years, and we feel like that's really making a difference."
