David Blumberg Launches $225M Fund in Miami

Blumberg Capital Closes $225 Million Fund, Discusses Investment Strategy

Blumberg Capital, established in 1991 by David Blumberg, has recently finalized its fifth early-stage venture fund, securing $225 million in commitments. This fund exceeded its initial target of $200 million and has already been deployed into 16 startups globally.

Global Presence and Recent Investments

The firm maintains smaller offices in key locations including San Francisco, New York, Tel Aviv, and Miami, with Blumberg relocating his family to Miami last year. The firm’s investment portfolio includes companies like Nutanix, DoubleVerify, Katapult, Addepar, and Braze.

Market Optimism and Successful Exits

Blumberg expressed considerable optimism regarding the current market conditions, citing strong returns on previous investments. Nutanix has yielded a 68x return, while DoubleVerify achieved a 98x return upon its IPO in April. Katapult went public through a SPAC merger in July, and Addepar is currently valued at over $2 billion.

Focus on AI-Driven Data Analysis

The firm’s recent investment strategy centers around leveraging artificial intelligence to analyze large datasets. This is then integrated with software process automation and internet/mobility technologies.

Investing in Mining Innovation

Blumberg Capital is backing companies applying AI to traditionally established industries. One such investment involves a company utilizing AI in the mining sector – specifically lithium, gold, and copper – to optimize exploration efforts.

This approach helps miners pinpoint the most promising ore deposits, reducing wasted time and resources. The firm partners with mining companies, providing proprietary and publicly available data, and receives a share of the mine’s output in return for its expertise.

Equity and Production Model

This investment model mirrors practices common in the oil and gas exploration and production (E&P) industry, where service providers take equity stakes in projects. Blumberg believes this aligns incentives and ensures mutual benefit.

Fund Size and Check Amounts

This fund is comparable in size to the fourth fund, which closed with $207 million in 2017. Blumberg Capital typically invests between $1 million and $6 million per company.

Portfolio Strategy and Return Expectations

The firm aims for substantial initial ownership in its portfolio companies. A successful fund requires a 3x return, necessitating a diversified portfolio with a mix of successes and failures.

Typically, 20% of portfolio companies fail, 20% become high performers, and 60% achieve moderate success. To achieve a $600 million return on a $200 million fund, six companies must generate $100 million each, requiring them to reach a $1 billion valuation with the firm retaining a 10% ownership stake.

Maintaining Ownership Through Dilution

The firm initially seeks 15% to 20% ownership, anticipating dilution through subsequent funding rounds to around 10%. This strategy has proven effective in previous funds.

Consistent Performance

Blumberg Capital boasts a strong track record, with all previous funds delivering positive returns for investors. The firm has consistently avoided losses for its limited partners.

Life in Miami and Future Outlook

Blumberg’s move to Miami has been positive, though he emphasizes it’s distinct from Silicon Valley. He believes Florida offers unique advantages for both his family and business.

Strategic Location and Accessibility

Miami provides convenient access to Israel and New York, eliminating time zone challenges. Several portfolio companies and limited partners are also relocating to or already reside in Florida. The location also facilitates easier access to South America for distribution opportunities.

Despite the move, Blumberg maintains that travel to California and New York remains readily accessible. He is actively engaged in the tech community, attending events like a recent JPMorgan gathering with 150 tech founders.

Image: From left to right, David Blumberg (Firm Founder), Yodfat Harel Buchris (Managing Director), Steve Gillan (COO), and Bruce Taragin (Managing Director).