Early-stage venture firm Mercury Fund closed on funding pledges totaling $160 million for its fifth and largest fund.
Venture capital firms have had a busy month with new fund commitment announcements. In addition to Mythos Ventures, Connect Ventures, Fuse, and Unconventional Ventures, Mercury Fund has announced new funds this month.
The company has existed for ten years under the name DFJ Mercury. When Draper Fisher Jurvetson reorganized its businesses in 2013, it adopted the Mercury Fund. Within its portfolio of more than 50 companies, Mercury Fund has today contributed to creating more than $9 billion in enterprise value.
This fifth fund, which had a $150 million initial target, is supported by current investors and new limited partners, including university endowments, foundations, and family offices. Blair Garrou, co-founder and managing director of Mercury Fund, told TechCrunch that a significant portion of the new investors are headquartered in the central United States, where Mercury Fund makes investments.
Mercury Fund, based in Houston, typically raises money every three to four years to allow for capital deployment, according to Garrou.
Raising this particular fund took less time than it had in the past, according to Garrou. “That was caused by how well our prior fund performed. We closed just before COVID, but we used it again at COVID. Among the genuinely outstanding businesses we had in that enjoyable period were Cart.com, Otto, and Signal Advisors.
SaaS opportunities discovery
The business concept of the organization includes funding founders who are establishing revolutionary SaaS and data platforms in niche technology industries outside the coastal tech clusters. There are places where they need more resources or startup ecosystems than their coastal counterparts.
Garrou stated that more than five years ago, there was a greater emphasis on business-to-business related to industrial SaaS when discussing the SaaS potential in those countries. The automotive, food and beverage, and energy industries are examples.
Today, the focus is on vertical SaaS and business owners redefining the customer experience. Garrou observed this, for instance, in Otto and RepeatMD, one of its investments from the new fund. RepeatMD is a fintech platform for doctors selling non-insurance reimbursed items focusing on patient involvement in Houston.
The SaaS playbook is beginning to be adopted and advanced by groups of highly successful businesses, according to Garrou. “In fund three, we dominated the B2B market. Fund Five has broadened that to include B2B, B2C, and data platforms.
Mercury has, therefore, developed an operationally focused investment approach that aids in providing those resources so that portfolio firms can expand more quickly.
A ‘middle America’ fund
Mercury Fund sought money for its fifth fund in 2021 while investing it in a “middle America” fund, which Garrou described as “our best-performing fund today.” He said the firm’s portfolio experienced over ten exits that year, which pleased the limited partners greatly.
The fundraising environment was “pretty robust,” according to Garrou, who also noted that this was when the firm’s model reached its full maturity. In 2022, when funding fell off, Garrou returned to Mercury’s LPs to resume discussions. Not only did the LPs continue with them, but some increased their initial investment.
Raising capital is always complex as a “middle America” fund, but Garrou explained that our concept is distinct. “We witnessed hybrid work becoming the norm during COVID, and businesses could hire talent from anywhere and raise financing everywhere. That fits very well with how operationally oriented our fund is.
Mercury has thus far made seven investments from the fifth fund in addition to RepeatMD. In total, Garrou anticipates making 18 to 20 investments. Other companies include Polco, a Wisconsin-based platform for community engagement polling for local and state governments; MSPbots, a Chicago-based platform for AI-driven process automation for small and mid-sized managed service providers; and Brassica, a financial infrastructure technology company with offices in Houston and Cheyenne, Wyoming that develops enterprise solutions for alternative assets.
According to Garrou, we anticipate investing in this fund for an additional two to three years. In 2025, we anticipate having a terrific liquidity phase similar to the one we had in 2021. If so, we’d love to raise it again later.
[Source of Information: Techcrunch.com]
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