D.C.-area startups aren’t the only ones raising money at a rapid pace. Local venture capital firms are taking their fingers off the pause button as the pandemic recedes, looking to raise new millions themselves.
Some of the increased money flow of late is due to a growing comfort level with managing it remotely, for both funders and investors.
In the second half of 2020, “funds and companies began to figure out how to raise capital in a fully virtual environment,” said Ollen Douglass, managing director of Motley Fool Ventures. “Moving into 2021, we are seeing increased fund formation activity, and company financings are quickly moving back to the 2019 pace.”
The bump in funding activity is rippling to companies in bigger-than-usual rounds — no surprise to John Backus, co-founder and managing partner of Proof.VC. “Great companies are raising bigger and bigger rounds of financing more quickly, because investors are really chasing that handful of ‘great’ companies.”
Take his firm: Seven of its 55 companies raised follow-on rounds of capital in the first half of 2021, and 18 of the 55 companies have already raised money at a valuation of $1 billion or more, he said.
Venture capital funds are also seeing more companies go public, often through blank-check company combinations. That generates more returns for investors, which then look to reinvest those funds into the VC ecosystem, “a true virtuous cycle,” Backus said. To that end, two of Proof’s companies have gone public within the last six months, another will hit the public markets Friday and a couple more have announced public offerings for later this year. Typically, a VC fund is lucky to have a few initial public offerings in a lifetime, let alone in a single year.
Several VC funds are quietly growing in Greater Washington — here’s a closer look at a few.
Sands Capital Ventures
The Arlington firm has indicated plans to raise a new private equity fund entitled Sands Capital Global Innovation Fund II, according to a Securities and Exchange Commission filing.
Sands did not indicate the size of the planned fund, and the first sale had yet to occur as of the June 10 filing. The firm declined to comment for this story because of SEC regulations that prohibit doing so during active raises.
Up to this point, Sands Capital Ventures has raised $941 million across five funds, most recently with its Global Innovation Fund I, closed in March 2019 with $351 million, per venture data firm PitchBook. Its global innovation investment strategy focuses on mid- to late-stage technology companies, with a $25 million to $100 million target investment per company, Sands reports on its website.
Sands previously launched a $145 million life sciences fund in 2019, a $173 million global venture fund in 2018, a $159 million global venture fund in 2016 and a $113 million global private growth fund in 2014, per PitchBook data.
Sands Capital Ventures invests in IT, health care, financial services and consumer companies around the world. Its portfolio companies include food delivery unicorn DoorDash, workplace productivity tool Slack and workflow software UiPath. This is a younger affiliate of the nearly 3-decade-old Sands Capital Management, a long-term investor in publicly traded companies founded in 1992 and led by CEO Frank Sands.
Accolade Capital Management
The District venture capital firm has raised $176.68 million for its Accolade Partners Growth II fund, per a June 21 amended filing with the SEC. The first sale for that fund was nearly a year ago, on July 2, 2020, and it now has a total of 154 investors, according to the filing.
Accolade has raised $1 billion across six funds, including $280 million for Accolade Partners Growth I that closed in December 2019, according to PitchBook. As a “fund of funds,” it invests across the private equity landscape, from venture capital to growth equity to blockchain, and directly into companies in the health care and technology space.
And those investments in health care and tech — “the two primary growth sectors in the U.S.” — have only further benefitted the firm through Covid-19 because “the pandemic accelerated both of those,” said Atul Rustgi, partner with Accolade Partners. “We’re seeing accelerated revenue growth almost across our portfolio, particularly in software, and we’ve been the beneficiaries of that,” he said, adding he is unable to speak specifically to the current raise because of SEC regulations.
Accolade’s portfolio includes notable venture funds Amplify Partners LLC and Andreessen Horowitz, as well as local fund Aldrich Capital Partners. The firm has also put money into QED Investors, led by Capital One co-founder Nigel Morris, and has backed artificial intelligence fund Foundry.ai. Its direct investments include San Francisco-based subscription meal delivery service Sun Basket, Boston software firm Acquia and Detroit enterprise software company Compuware Corp.
Joelle Kayden, Accolade’s managing partner, founded the firm in 2000 after serving as managing director at Baltimore investment bank Alex. Brown & Sons, helping manage its venture capital service group. Its dozen other listed employees include Rustgi, a former McKinsey & Co. exec, and Chief Operating Officer Andrew Salembier, who worked at Georgetown University’s investment office.
Centerpoint Capital
A new D.C. private investment firm, from retired military veteran and entrepreneur Michael Lorino, is raising its first fund.
Centerpoint disclosed its intention to raise capital in a June 16 SEC filing, though it did not indicate the planned size of the fund, noting only that nothing had been sold as of that date.
The firm plans to look at companies across size and industry “that have the highest probability of growth” over a roughly six- to 18-month period, Lorino told us about the firm's broader investment strategy, though he was unable to comment on fund details specifically. “This time horizon means we don’t get distracted by companies or stocks that are merely the trending topic of the day — thus creating value for investors that are not affected by chasing short-term fads or meme stocks,” he said.
Lorino, Centerpoint's founder and chief investment officer, is a former U.S. Marine Corps officer who just retired after a 20-year military career. During that time, he supported combat operations in Iraq and counterterrorism operations in east Africa, among other deployments. He was also managing director of a $250 million portfolio he developed at the Pentagon for the Marine Corps, work that included designing and implementing technology that led to the military branch's first artificial intelligence-sensing capability. The technology is still used today to help unit leaders make decisions in challenging environments.
Lorino is also founder and owner of Alexandria residential real estate company Fidelis Property Group, which he and his wife, Bethany Stalder, started in 2013 and continue to run together.
