Investment firm Cofounders Capital has closed its third fund and is looking for more tech startups.
Almost exactly a year after launching its third fund with an initial close of more than $23 million, the Cary company says it’s closed on the full $50 million. Managing Partner Tim McLoughlin said the plan is to invest in 15 to 20 companies.
The idea is to funnel in an initial investment of about $1 million “and then have significant follow-on reserve capital for our best performing companies, he said.
Having extra in reserve could be critical in a potential downturn, McLoughlin said.
“With investors pulling back a little bit, there’s much more financial risk of where that next round of financing is going to come from,” he said. Having extra capital on hand could potentially allow Cofounders to quadruple its investment. And it could save its portfolio companies the time, risk and stress of having to scramble for additional capital amid unfavorable macroeconomics.
McLoughlin said fundraising for Fund III, at times, was tumultuous. Initially, some of its potential investors were riding the highs of the stock market and not looking for alternative investment classes. When the market tanked last year, some investors shifted their interest to funds like Fund III.
And falling valuations meant a target rich environment. “Some savvy investors saw that,” McLoughlin said. “We have just tremendous deal flow right now, and we share that with a lot of investors.”
Cofounders, founded by serial entrepreneur David Gardner, raised $12 million for its first fund. Fund II, in 2018, raised $31 million.
Inno asked if Cofounders was already starting to think about a fourth fund.
“The way we’ve tried to set up the Cofounders team and family of funds is so we can be doing this for decades to come,” McLoughlin said.
Cofounders recently made its first investment from Fund III, part of a $6.5 million round of financing for Cycle Labs.
Right now, Cofounders has about $95 million in assets under management.