Fulton-based Conversion Capital has closed a new $122 million fund focused on fintech startups.
The venture capital firm plans to use the fund, which closed in April, to invest in 25 to 30 startups that build software, cloud infrastructure and data technology. The firm's investments are focused on pre-seed and series-A companies and will range from $500,000 to $5 million.
Conversion Capital has had two previous funds, a $10 million fund in 2015 and a $20 million fund in 2017. The firm has a total of 60 portfolio companies and so far has seen 17 exits from either IPO or acquisition.
The company now plans to use the new larger fund to take a greater ownership stake in the companies they invest in. The firm began raising funds in the first quarter of last year, with a goal of raising $100 million.
Among Conversion Capital's portfolio companies is Baltimore-based RedOwl Analytics, which was purchased by a division of defense giant Raytheon for $54 million in 2017. Conversion founder Christian Lawless said the company often invests in companies that create technologies that can also serve commercial industries.
Lawless tends to focus on industries that face complex regulations, such as financial services. Those industries often feature a lot of bureaucracy and incumbent technologies that hinder growth, he said. Conversion Capital tries to invest in both financial services companies and companies that create breakthrough technologies that help businesses grow and innovate. One of Conversion Capital's most notable portfolio companies, Ramp, which is valued at $8.1 billion, helps small businesses pay bills and manage expenses.
“You should be able to focus all of your time on the actual core product and your consumers,” Lawless said. “You shouldn't have to spend all your time trying to manage your finances.”
Conversion Capital's early years were driven by the rapid growth of cloud computing, which remains a focus of Lawless as more companies move critical infrastructure to the cloud.
The company also introduced a new initiative, Conversion Labs, during the Covid-19 pandemic that works to create companies from scratch.
The lab has a network of advisors from a variety of industries, who Lawless looked to for advice during the pandemic. The company brings in talent and then gives them the resources to help launch a company. The fund will then invest in that new company created from Conversion Labs.
"It might be that we have a really good idea, and we find the right founding team," Lawless said. "It could be that someone who comes to us and says, 'I have a really good idea, but it's still super early.'"
Conversion Capital hopes to work with more companies in Maryland, such as the many local companies that have previously worked with the defense industry and other government sectors.
