Vienna, VA-based Grotech Ventures, which invests in early stage tech firms, has raised a new $225 million fund. The fund was oversubscribed by more than 10 percent, and was raised from both existing and new investors. GV II bringsGrotech’s total capital under management to $1.3B across all funds.
Frank Adams, the firm’s managing general partner, told PE Hub that raising the fund took 20 months because institutional investors were “slow and methodical in their due diligence process, more so than in the 29 years we’ve been doing this.”
Grotech Partner Don Rainey tells the TechJournal that the company is investing in Mid-Atlantic and Mid-West early stage IT firms in Enterprise and infrastructure software, social and cloud computing, security tech, consumer Internet, ecommerce, and energy and healthcare It.
Includes Charlotte, Atlanta, RTP
For Grotech, Mid-Atlantic includes the Carolinas and Atlanta, Rainey notes. Adams told PE Hub the company is spending a good deal of time in Atlanta and Charlotte, NC, for instance, developing deep relationships.
Rainey says that while parts of the social sector are crowded and the opportunity has passed, “There is still a lot of greenfield in it.”
Grotech typically invests the first institutional money a startup raises and continues to invest as the firm grows. Its strategy includes forming top-tier industry syndicates with other investors. It generally invests from $200,000 to $20 million in startups, although initial investments tend to be smaller.
Grotech, which has offices in Virginia, Maryland and Colorado, has already made 12 investmetns from the new fund and continues to invest from its current fund, which has performed well.
We asked Rainey if its harder for tech startups to get that first investment these days.
“For top tier entrepreneurs its about the same,” he says. “For the next tier that isn’t as obvious as a backable startup, it’s tougher. If you’re the guy or gal who sold your last company for $500 million and you’re doing another raise for a new company, you can expect the processs to be about the same as it was two, five, or ten years ago.”
It recently secured a major exit with NexGen Storage, which Fusion-lo Inc. acquired in April for about $119 million in cash and stock.
It’s largest exit so far was from the DC-based daily deals site LivingSocial. It led the company’s $5 million Series A round and has since sold chunks of its stake to Amazon, Lightspeed Venture Partners, T. Rowe Price and other buyers for more than $200 million.
Overall, Grotech’s last $109 million fund, which closed in 2009, has a current IRR of 70 percent. — Allan Maurer