One of Texas' most active venture capital firms has raised a new fund that it plans to deploy to early-stage tech startups across the state.
LiveOak Venture Partners said Nov. 17 it has secured $210 million for its third venture capital fund, a significant jump from its prior two funds, which were $105 million each.
The firm says this is the largest early-stage fund focused on Texas technology startups in a decade — Austin Ventures' early-stage fund, which it wound down, had about $900 million. LiveOak will be able to cut bigger checks, deploying round-leading investments of $1 million to $5 million, which could be added to as companies mature and seek additional funding.
LiveOak first publicly signaled plans to raise a new fund in October, when a securities filing showed it sought to raise $150 million. It found a big appetite among institutional investors, as well as from founders and other sources, allowing it to exceed that target.
About 90% of the funding came from institutional investors, such as pension funds and university endowments, LiveOak co-founders and partners Venu Shamapant and Krishna Srinivasan said, adding that about 40% of the funding came from new investors.
Investors had reason to get excited. LiveOak was an early lead investor of CS Disco Inc., a legal-technology startup that moved from Houston to Austin after a $2 million LiveOak investment. The company went public earlier this year and now has a roughly $3 billion market capitalization.
Recent investments by LiveOak in Austin companies include Eventus Systems Inc., a fintech software maker; ConverseNow Technologies Inc., maker of automated restaurant ordering assistants and self-service kiosks; and cybersecurity startup Intrigue Corp.
The founders say they don't plan to mess with a successful strategy that's based on being highly engaged with Texas founders between board meetings and tapping them into LiveOak's mentorship and talent networks.
"Don't change something that's not broken," Shamapant said. "We're going to continue to, from a strategy standpoint, be 100% focused on Texas and early stage. But a larger fund, I think, will also give us an opportunity to consider a couple of potentially growth-oriented investments. And give us opportunity to stay longer with our existing portfolio companies and continue to support them longer."
LiveOak's new fund comes as Austin's venture capital ecosystem continues to grow, both with continued fundraising and investments from firms that have been established in Austin for years, such as Silverton Partners, S3 Ventures, ATX Venture Partners and Next Coast Ventures, and with the addition of firms that have opened offices here or relocated, including 8VC and Mithril Capital Management.
Shamapant and Srinivasan are among the most experienced startup investors in Austin. They were both investors at Austin Ventures during its startup heyday, and joined forces to found LiveOak in 2012 as AV got out of early-stage investing.
"This is not the same Texas market that we started in 20 years ago," Shamapant said. "It's also significantly more dynamic from an activity standpoint that therefore is going to attract more capital. So we see that as not necessarily a good thing, not necessarily a bad thing. In terms of kind of what impact it has on our strategy, at the end of the day, our approach to how we invest is to focus on adding value and becoming kind of the neighborhood VC that an entrepreneur wants to work with. That has not changed, and continues to be the primary differentiator for us relative to any of the other players that are going to come into this market."
LiveOak's new fund is coming online during a record year for startups raising money in Austin, as well as many other parts of the country. A PitchBook-NVCA report in October showed 265 VC deals in Austin through the third quarter, which was 85% of the way to a record in terms of deal count. Those term sheets represented a total of $3.8 billion invested in local companies, which was about 154% of the investment record Austin set in all of 2020.
Austin startups represent about 70% of LiveOak's portfolio. But it has invested in several Dallas startups in recent years, including AmplifAI, Mavenir and Take Command Health.
"We're just as actively focused on San Antonio and Houston," Shamapant said, noting the firm has been talking with startups in San Antonio and expects to land deals in Houston.
The co-founders don't have any plans to open offices in other Texas cities at the moment. But Srinivasan said he and Shampant have had about $1.5 billion in value creation outside of Austin.
"We've always been massive believers in Texas broadly, as an area that can be served well from a single office," Srinivasan said. "We have done that successfully for 20-plus years."
