Miami, Florida-based VC firm Atomic secured $320M in capital commitments from limited partners toward its fourth fund. The current fund is its largest yet to date, eclipsing the $260M preceding fund from 2021. Venture studio Atomic will use the funds to create new startups and back existing portfolio companies. The fund sifts through its ideas to incubate startups and finds co-founders to develop them further. With the new fund, the firm intends to create nearly 60 startups, half of which it expects to reach the market. 90% of the fund's capital is institutional, provided by LPs such as Marc Andreessen and StepStone Group. The firm targets 3x to 5x return on early-stage investments.
Atomic's fundraising comes as LPs are slowing their commitments to new VC funds. U.S.-based VC firms raised 99 new funds worth $11.7B in Q1 2023, per Pitchbook. At the current pace, fundraising at this year's end may fall short of 2018's totals and come 73% lower than the record set in 2022. Despite the slowdown, two funds closed above $1B in Q1, namely B Capital Group's $2.1B fund and Bain Capital Ventures' $1.9B fund.
Last year, VCs slowed their fund deployment into startups. However, they were able to raise funds worth $170.8B in 2022, surpassing the previous year's total of $158.5B. As a result, U.S.-based VC firms had $289B in dry powder available at the end of last year. LPs were making commitments to new VC funds until the end of last year. However, most of the new capital was being raked in by experienced fund managers. On the other hand, first-time fund managers found the fundraising environment very challenging. Debut VC funds secured $10.2B in 2022, less than half of the $22.2B secured in the previous year. Pitchbook expects the environment to remain challenging this year for emerging fund managers, who may witness an even steeper drop in funding. S2G Ventures senior managing director Sanjeev Krishnan believes that "A lot of investors would probably prefer the new Sequoia fund to a new emerging fund manager right now." Niche and differentiated funds will be able to attract capital from LPs amidst the tough funding environment. Despite the waning confidence in global growth-stage technology firms, Southeast Asian VC firm East Ventures raised $250M for its 12th fund today. The firm intends to double down on growth portfolio companies. Last week, Mayfield Fund raised two funds worth $955M, of which $580M is earmarked for early-stage fund Mayfield XVII with the remaining $375M for Mayfield Select Fund II to back Series B and beyond startups. The new funds are 27% larger than the previous funds that raised $750M from LPs. The firm intends to stick to its previous investment philosophy of backing 30 startups per fund, most in the early stages. Mayfield's Navin Chaddha believes that this consistency helped the firm raise capital from LPs while other fund managers struggled to close. |
