Silicon Valley investment firm Menlo Ventures has closed a $250 million opportunity fund. The fund, which is led by a group of managing directors that includes Venky Ganesan, Matt Murphy, Mark Siegel and Pravin Vazirani, is targeting growth-stage investments in what it calls the “venture-valley” funding gap, a financing challenge encountered by growth-stage ventures looking to scale.
Labelled the Menlo Special Opportunities Fund, it is the first opportunity fund for Menlo Venture and was raised in six weeks, with oversubscription by limited partners (LPs) leading the fund to exceed its original $200 million target. The fund will make Series B investments with mean investment quantum of between $20 million and $25 million and Series C investments of up to $50 million.
The early-stage growth companies that the fund is targeting may already have a product and generating revenue of between $2 to $3 million in quarterly revenue.
However, due to a funding gap they encounter liquidity problems and a funding gap that lead to them being unable to raise new funds and folding. Ganesan notes that other firms do not raise enough capital to fully capitalise on the market opportunities they encounter.
According to Menlo, the oversubscribed fund will target investments at the Series B and C stages, with investments including a deployment of capital across portfolio and non-portfolio companies. The aim of targeting investments in firms within the Menlo portfolio and beyond is to curate and vet the quality of their deals, as well as maintaining high selection standard.
Ganesan claims that a ‘venture valley’ has opened up from the Series B to C stages as venture capital (VC) and investment entities like hedge funds and private equity (PE) firms conduct seed investing and later stage investments.
Commenting on this Ganesan explained: “We don’t want companies getting lost in the venture valley. We think there is a gap in inflection point investing,”, noting that raising capital in Series B and C rounds were progressively more difficult.