Sean O’Sullivan, the founding father of the worldwide enterprise outfit SOSV, has slowly however steadily constructed up a large operation through the years.
SOSV began off as a household workplace, investing the capital of O’Sullivan after he cofounded two firms, together with MapInfo, an outfit that went public in 1994 earlier than Pitney Bowes acquired it years later, in 2007. The seed-stage investing outfit has since raised three extra funds, together with a $277 million early-stage fund that it closed in 2019 and is actively investing from proper now.
Now, to enrich these funds, the group has raised $100 million for what it’s calling a “select fund” that’s meant to assist SOSV keep its professional rata stake in a few of its breakaway portfolio firms.
Because of different instruments available in the market, SOSV wasn’t fully hamstrung till now. Instead, SOSV has, every so often, assembled a particular function automobile to re-invest in sure of the startups it has backed. But O’Sullivan says these have been comparatively small SPVs — assume $2 million in dimension or much less. The new fund, he says, is anticipated to put in writing checks of between $2 million and $5 million and even as much as $10 million — or 10% of the fund, per SOSV’s settlement with its buyers.
Certainly, the brand new fund additionally offers startups much more purpose to work with SOSV, which tends to put in writing its seed checks to first-time founders, who O’Sullivan observes are sometimes ignored — wrongly — by buyers in favor of repeat founders.
He factors to Apple, Microsoft, Facebook, Google and Alibaba, noting that panorama would look relatively completely different with out them. He says skilled the phenomenon himself when he cofounded an organization (NetCentric) after MapInfo. “People were just lining up to invest,” he says. “It was so easy to raise the funds without anything other than a business plan, and these days, you don’t even need one of those.”
That doesn’t imply SOSV will get as massive a chew as it’d like in each deal. Though SOSV has loved success by betting on new entrepreneurs — it was among the many first buyers in FormLabs, for instance, an organization now valued at $2 billion; it additionally backed JUMP, the bike-share startup that Uber acquired in 2018 — a $100 million fund is small by present requirements. SOSV may nicely discover itself competing in opposition to gamers which have billions of {dollars} to deploy and that are writing greater checks to youthful firms at a velocity by no means earlier than seen on the earth of enterprise capital.
It’s not an absurd concern, agrees O’Sullivan. He says he noticed some sharp elbows simply this week, in reality. Part of a $100 million-plus spherical was coming collectively, and a agency that O’Sullivan declined to say didn’t need to make room for the startup’s Series B or A buyers as a result of it wished to fulfill a sure fairness threshold.
O’Sullivan says the sooner buyers acquiesced. (“They’re giving us a multi-billion valuation” and likewise “trying to buy secondaries from existing investors,” he explains, whereas including that SOSV would typically choose to carry its shares by means of an IPO.)
Still, he suggests there’s no want to fret about SOSV. While the sooner buyers went with the move, O’Sullivan says that in “most cases, there’s enough to go around for the previous investors.”
He additionally calls it “good protocol for the late-stage investors [to make room] if they want to continue to have us introducing deals to them.”
Put one other manner, smaller fund or not, SOSV has a sort of leverage, too.
