SOSV Closes $100M Fund for Maturing Startups

SOSV's Strategic Growth and New Investment Fund

Sean O’Sullivan, the founder of the global venture capital firm SOSV, has been diligently expanding the organization’s capabilities over time.

Initially, SOSV functioned as a family office, managing the capital of O’Sullivan following his involvement as a co-founder in two ventures, notably MapInfo. MapInfo became a publicly traded company in 1994 and was subsequently acquired by Pitney Bowes in 2007.

Fundraising and Investment Strategy

The seed-stage investment firm has successfully raised three additional funds to date. This includes a $277 million early-stage fund finalized in 2019, which is currently being actively deployed into promising startups.

To further bolster its investment capacity, SOSV has secured $100 million for a new fund designated as a “select fund.” This fund is specifically designed to enable SOSV to maintain its proportional ownership stake in high-performing companies within its portfolio as they progress.

Addressing Investment Needs

Previously, SOSV addressed similar needs by occasionally forming special purpose vehicles (SPVs) to reinvest in its portfolio companies. However, these SPVs were typically smaller in scale, generally around $2 million or less.

The new fund is anticipated to facilitate investments ranging from $2 million to $5 million, with the potential for larger investments of up to $10 million – representing 10% of the fund, as per the agreement with its limited partners.

Benefits for Startups

This new fund provides startups with an even greater incentive to collaborate with SOSV. The firm frequently provides initial funding to first-time entrepreneurs, a demographic O’Sullivan notes is often underestimated by other investors who favor those with prior founding experience.

He cites examples like Apple, Microsoft, Facebook, Google, and Alibaba, emphasizing how different the technological landscape would be without their contributions.

O’Sullivan recalls a similar experience after co-founding NetCentric following his time at MapInfo. He observed a significant shift in investor interest, stating, “Raising funds became remarkably easy, often requiring only a business plan – and even that is becoming unnecessary in today’s environment.”

Navigating a Competitive Landscape

Despite its success in identifying promising new entrepreneurs – including early investments in FormLabs (now valued at $2 billion) and JUMP (acquired by Uber in 2018) – SOSV acknowledges the challenges posed by a rapidly evolving venture capital market.

A $100 million fund is relatively modest compared to the multi-billion dollar funds deployed by some competitors, who are writing larger checks at an unprecedented rate.

Maintaining Influence

O’Sullivan recognizes the increasing competitiveness, noting recent instances of aggressive tactics from other firms. He described a situation where a firm sought to exclude existing Series A or B investors from a $100 million-plus funding round to achieve a desired equity stake.

According to O’Sullivan, the earlier investors ultimately conceded. He explained they were being offered a “multibillion valuation” and that the firm was also “seeking to purchase shares from existing investors.” SOSV, however, generally prefers to retain its shares until a potential initial public offering (IPO).

Leverage and Protocol

Nevertheless, O’Sullivan remains confident in SOSV’s position. He believes that in “most instances, there is sufficient capital available for previous investors.”

He emphasizes that it is “good protocol for late-stage investors to accommodate earlier investors” if they wish to continue receiving deal flow from SOSV.

In essence, SOSV’s value lies not in managing an enormous fund, but in the leverage it possesses through its network and deal-sourcing capabilities.