Baltimore venture capital firm Squadra Ventures has raised a $105 million fund, with the possibility for even more investment on the way despite a downturn in the national markets.
Squadra managing director Guy Filippelli plans to invest between $2 million and $4 million each in 12 to 15 companies with the new fund, the company's second. Filippelli will focus on startups in the defense and cybersecurity sectors, two areas that are relatively insulated from the overall decline in the technology industry because of the ongoing war in Ukraine and the constant need for new cybercrime prevention measures.
Several larger institutional investors may also decide to invest in Squadra once they complete a due diligence process, Filippelli said, possibly boosting the fund size up to $120 million. Filippelli began raising money for the fund in 2021, with an initial goal of raising $80 million.
In 2021, the company raised its first $27 million fund and invested between $500,000 and $2 million in around 11 portfolio companies. Squadra’s first fund had a wider focus, investing in companies ranging from cybersecurity firms and military technology to veteran-owned businesses and local Baltimore technology. Several success stories grew out of Squadra's investments, including veteran workforce development firm Instant Teams landing on the 2022 Inc. list of the nation's fastest-growing companies and cyber risk prevention firm Privva getting acquired.
The second fund will have a more narrow focus than the first fund in order to offer more specialized help to portfolio companies that align with the expertise of Squadra's 12-person, full-time staff. Filippelli became a venture capitalist after his company RedOwl Analytics got acquired by Raytheon for $54 million in 2017 and several of his staff members also have experience in the defense and cybersecurity sectors. The second fund has already made four investments, Filippelli said.
“If we were to invest in a health care tech company, we wouldn't have a network in that space,” Filippelli said. “We can help a company build, but we couldn't help them go to market.”
Squadra's successful raise comes at a difficult time for the venture capital industry. Venture capital funds are on track to raise the smallest dollar amount from investors since 2017, according to industry analyst firm Pitchbook, with venture fund sizes declining across the country. It’s been hard for Squadra to build relationships with new investors to invest in the fund, Filippelli said. Despite the difficulty of the overall economic environment, Squadra expanded its investor base from primarily high-net-worth individuals, such as doctors, to include more family offices and institutional investors, such as endowments, mutual funds and other money managers.
“As you think about building Squadra to a point where it's an entity that truly lives far beyond me, it’s increasingly important to have that institutional backing,” Filippelli said. "It's a progression, just like a startup."
