While some late-stage investors in Facebook, Groupon and Zynga are in the red because of the punishing public markets, Institutional Venture Partners is doubling down.
For the firm’s 14th fund, IVP is increasing the amount it plans to invest in standout companies to a total of $100 million per year, up from $50 million in its last fund, which closed in 2010. The Menlo Park, California-based firm said it will invest in 10 to 12 companies annually with the $1 billion fund, the biggest in its 32-year history.
IVP typically backs startups when they have established business models and revenue growth of 50 to 100 percent or more but still need more capital to invest in talent, marketing and new products. By writing bigger checks, IVP can enable companies to make acquisitions and stay private longer. Devoting more cash to a single target also allows the firm to make bigger bets on the secondary market, said Jules Maltz, who joined the firm in 2008 and was promoted to general partner last year.
“It allows us to invest a starting amount of capital and often double or triple our positions as the company succeeds,” Maltz said.
The firm scored big gains from bets on vacation rental site HomeAway, which went public a year ago, and Zynga, which first sold shares in December. Even though Zynga has plummeted 44 percent since its IPO to $5.63 per share, IVP is doing just fine. The firm invested $27.6 million when the stock was priced at 42 cents, according to to Zynga’s regulatory filings.
The rest of the firm’s portfolio reads like a who’s who of consumer Internet companies: Twitter, Buddy Media (acquired by Salesforce.com), Dropbox, LivingSocial, Shazam and WhaleShark Media are all in the mix.
Whether all of those deals convert to big profits is still up in the air. Last year, IVP invested in Dropbox at a $4 billion valuation and LivingSocial at a $3 billion valuation. That was before the Facebook IPO sent a sobering chill across Silicon Valley. IVP remains confident — in its own portfolio at least.
“Valuations are always high for premier companies,” said Maltz.