Oregon investment firm plans a $100M fund

Hillsboro-based Elevate Capital is gearing up to raise its biggest fund yet, targeting $100 million.

This is a significant step up from its first fund in 2016, which totaled $10 million, and from its second fund, which totaled $40 million. Founder and Managing Partner Nitin Rai expects to start fundraising early this year.

The first fund has already seen seven exits. The average hold period for companies in the portfolio was three years and the average return was 4x, said Rai. The firm has completed investing Fund I.

Fund II is also done with new investments but has room for follow-on activity, he said. Rai had started fundraising for Fund II in early 2020 but hit challenges with the onset of the Covid-19 pandemic. He was able to reach his $40 million target, but it took longer than expected.

The new fundraising effort comes at a challenging time for venture investing and the startups that depend on it. The amount of venture capital invested in the Portland metro sank 58.5% in 2023, according to the latest data from the Venture Monitor report.

Who is Elevate Capital?

Elevate Capital targets investment to underrepresented entrepreneurs. This includes founders who are women, BIPOC, LGBTQ+, and those with limited regional access to capital and opportunity. Elevate Fund II invested in 32 companies and 29 are still around. Half have Black founders and the majority of founders are Black women, said Rai.

“Despite all that is going on in the investment space and companies not surviving, our companies are surviving and thriving,” he said.

For Fund I, Elevate has seen an initial rate of return of 22%, higher than the target of 20%, said Rai. The latest Global Fund Performance report from research firm Pitchbook shows the venture capital industry as a whole with a three-year IRR horizon of 20.2%.

Rai also noted that his model for the fund emphasizes the generational wealth opportunities created for founders.

For example, he said traditional venture capital may invest in 20 companies and expect 18 of them to die. “That model doesn’t work us,” he said. “We come in early and support the entrepreneur and get to $3 million to $5 million in revenue and then bring in larger investors and at appropriate times do a secondary (offering) to take money off the table or completely get out.”

Instead of looking for “moonshots,” founders and investors can build a solid business and capital is returned faster.

The seven exits from Fund I have created nearly $260 million in generational wealth to the founders and employees, Rai said. Of that, $60 million has been cash back to founders and teams.

Fund I exits were:

For Fund II, 74% of its companies saw revenue growth in 2023, said Rai.

What's the outlook for Elevate's Fund III?

The performance of the first two funds has Rai confident in raising such a large Fund III. However, he knows it will be a challenge, especially as the funding landscape from limited partners has shifted over the last year.

“I expect it to be completely challenging and not different from the funds I raised in boom times. It took two-plus years (to raise Fund II). But we have returns. I’m traveling at investment conferences and a lot of institutional capital and family offices, they are demanding growth equity and they want their money back,” he said. “People didn’t care about returns before. But, now that the narrative has changed people want to see returns.”

In addition to Rai and the four-person investment team, Elevate has venture partners who are investors in the fund and who take an active role advising and supporting companies.

“I returned Elevate’s investment in my company in a very short amount of time and immediately became an investor in the Elevate Fund,” said Hubb founder Allie Magyar. “This is what Elevate is about: creating generational wealth and creating a circle of community that raises everyone up at the same time.”

The majority of Elevate’s existing investors are in the Portland area or Pacific Northwest. About one-third of the investors are from outside the area. The only major institutional investor from outside of Portland is Bank of America, however, the local leadership was instrumental in making making that connection, said Rai. He plans to go back to existing investors as well as explore family offices for backers.

As the fund has grown its geographic focus has also grown. The majority of investments are in Oregon or the Pacific Northwest but there are also investments in the Northeast and the Southeast.

The $100 million target reflects the opportunity Rai and the team see for not only investor appetite, but the founders as well. Companies have landed seed money, seen growth and now need that next step of investment. Rai wants 30% of Fund III to be focused on Series A and B rounds.

Oregon-based venture capital funds have been on the smaller side, with funds ranging from $20 million to $40 million. The only other fund of this size locally was announced in 2022 when Oregon Venture Fund said its next five-year fund will target $100 million.