Array Ventures Raises $56M for Enterprise Software Investments

Reframing Early-Stage Investment Expectations

Shruti Gandhi addresses a common misunderstanding regarding first-check fundraising. She asserts that early-stage founders don’t necessarily require emotional support from their initial investors, but rather investors who possess a comprehensive understanding of their specific business model – an understanding exceeding that of others.

The majority of entrepreneurs within the Array Ventures portfolio, a fund established five years ago to support enterprise-focused companies, are experienced founders, often boasting close to a decade of relevant industry expertise.

The Importance of Deep Industry Knowledge

Gandhi emphasizes that the ventures Array Ventures pursues demand substantial industry and customer insights. These are not skills readily acquired during a brief period post-graduation; the types of companies they fund are born from significant, practical experience.

With this conviction, Gandhi has successfully secured a substantial investment to deploy into what she defines as the “hard enterprise space.”

Array Ventures’ New Funding and Investment Strategy

Array Ventures recently finalized a new $56.1 million fund. This fund is earmarked for investment in approximately 30 startups concentrating on the core, technical aspects of enterprise technology.

Since the launch of its initial fund, Array Ventures has progressively increased its investment amounts, moving from $150,000 to a current range of $1.2 million to $1.5 million per startup.

The firm now aims to secure 15% equity in each investment, an increase from the 10% target of its second fund.

Focusing on Back-Bone Enterprise Tech

Gandhi points out that while many firms claim involvement in enterprise tech, their focus often leans towards bottom-up SaaS companies, particularly during the initial funding stages. She contends that few firms possess the technical depth required to invest in the foundational enterprise technologies driving the next generation of businesses.

Array Ventures does support vertical SaaS solutions, but prioritizes companies built upon “highly differentiated” core technological foundations.

Defining "Back-Bone" Technology

Gandhi explains that modern front-end applications require robust underlying technologies capable of managing large datasets, enhancing user security, and facilitating cloud migration. Therefore, Array Ventures invests in startups operating beyond the application layer, concentrating on areas like security, data infrastructure, and cloud solutions.

Examples of companies Array Ventures looks to emulate include Snowflake, Okta, Twilio, and Databricks, rather than Dropbox or Salesforce.

This strategic focus has led to investments in startups tackling challenges such as automated threat detection, data orchestration, and media discovery with licensing solutions.

Addressing Representation in Venture Funding

Gandhi’s approach is particularly noteworthy given that only 1.9% of venture capital is allocated to female enterprise founders, as reported by Work-Bench. Over a third of Array’s portfolio companies are led by women.

The investor believes her portfolio demonstrates a departure from the common biases faced by women in the technology sector.

“A prevalent assumption is that women entrepreneurs will focus on consumer-facing businesses – a bias inherent in the market,” she stated. “This same bias extends to perceptions of someone like myself, leading an enterprise fund.”

A Strong Network and Limited Partner Support

Despite potentially missing out on deal flow from prominent accelerators, Gandhi’s specialized niche benefits from a well-established community. More than half of the founders in Array’s portfolio have reinvested across all of its funds, including Peter Fishman of MozartData, Noam Ben-Zvi of Placer.ai, Analisa Goodin of Catch&Release, and Madhu Mathihalli and Mohan Gummalam of Hermis.

Additional limited partners in Array Ventures include Dan Wright of Data Robot, Elias Torres of Drift, Jaynti Kanani of Polygon, Vanderbilt University, MPowered Capital, and NSV Wolf.