Venture capital firms continue to raise new funds, at what seems like lightning speed. Two firms stuck out in recent days, including Urban Innovation Fund, which closed with commitments of $100 million for its Fund III and $20 million Opportunity Fund, and VMG Catalyst‘s $400 million Fund II.
Both firms are led by women, Clara Brunner and Julie Lein at Urban Innovation Fund, and Brooke Kiley over at VMG. What was unique about these two was the narrow focus each fund had. As the name suggests, Urban Innovation Fund invests in companies building technology to shape the future of cities, while VMG targets commerce.
Prior to starting Urban Innovation Fund, Brunner and Lein, both managing partners, were in commercial real estate development when she met Lein, who was doing political polling and consulting, at business school at MIT. Their first year they founded and ran their second year, the largest women’s event on MIT’s campus at the time.
They each kept trying to recruit the other into starting a company in their respective industries before coming together around a love of startups and the urban tech space. The firm invests in companies working on issues of livability, sustainability or economic vitality and often have a lot of regulatory and political challenges.
Having such a narrow thesis and other unique characteristics is something Brunner believes was beneficial when the fund was raising its third installment earlier this year.
“I think it’s a combination of we look different, we invest with a very different strategy and we have a strong track record,” she told TC. “That meant the round came together much more quickly than we were expecting. We were shocked by how fast it went.”
Urban Innovation Fund is a 100% woman-owned firm and 77% of the companies it backs have had a woman or a person of color on the founding team.
According to the Cambridge benchmarks, Urban Innovation Fund is a top 1% performing fund and has invested in companies like electric vehicle charging software company Electriphi, which was acquired by Ford in 2021, ESG asset management company Ethic, which has $2 billion in assets under management, and small business lend platform Jeeves, which was valued at $2.1 billion earlier this year.
Brunner and Lein set out to raise $80 million in January and ended up meeting their hard cap of $100 million, with 95% of its new capital coming from institutional investors. Not a bad problem to have, but Brunner said they have a great base of limited partners from previous funds and had to turn away investors.
That’s how the $20 million Opportunity Fund, Urban Innovation Fund’s first in this category, came about. Previously, the firm was utilizing special purpose vehicles to invest in a single deal, and had raised a bunch of them in the last few years to do later stage investing in breakout companies from its portfolio.
“Now that we have our new opportunity fund, we don’t need to do SPVs anymore,” Brunner said. “We can do all of our late stage follow-on investing through the new vehicle.”
Urban Innovation Fund just activated the third fund in July, so it is in diligence with a few new startups, but has not made any investments yet. Average check size for previous funds was around $1 million, and the new fund will enable that to grow to $1.5 million. The fund is looking to either lead or be a large second check in about 30 seed stage rounds.
Over at VMG Catalyst, Brooke Kiley, founding partner, was in venture capital since graduating from Wharton, starting out at Insight Partners. She told TC via email that she had “always had a passion for entrepreneurship and the idea of working side-by-side with startups seemed like a dream career.”
Kiley left Insight in March 2020 to join VMG Catalyst. The firm’s first fund was worth $250 million, and it recently closed on a $400 million Fund II. VMG typically leads Series A and Series B rounds that are between $8 million and $50 million in size. It has made 22 investments to date, and its thesis revolves around commerce enablement software and marketplaces.
Its second fund is 60% larger than its first, and most of the growth came from existing limited partners, she said.
Within the second fund, the company has made three investments within the vertical supply chain, a category she said the firm was “particularly excited about.” Among them was Milk Moovement, providing supply chain tools for the dairy industry.
“We believe that innovative software and sophisticated supply chains will define the next generation of leading brands and retailers,” Kiley said. “We have a unique vantage point into the consumer industry through VMG’s history as CPG investors, and this allows us to invest with conviction and speed, serving as committed strategic partners in today’s fast-moving, competitive landscape.”
Even more new funds
As we’ve previously reported, venture capital firms have more dry powder than ever before, and the past few weeks have been no exception:
- Upper90 had a first close of its $180 million first fund.
- South Col, an e-commerce accelerator, launched a $50 million accelerator fund to provide capital, guidance and operational resources to industry founders. South Col is a joint venture between SellersFunding, Global Wired Advisors and Escala.
- FRAMEWORK, which invests in Series A and Series B companies, said it made a first close on over $100 million for its Fund II and expects to close the fund, targeting $250 million, by the end of the year. It also unveiled its new model of activity capital that uses proprietary data, growth and operational frameworks “to reinvent the early-stage investment ecosystem, and to facilitate intelligent hyper-growth in startups.”
- CEI Ventures, which manages socially responsible venture capital funds, closed its fifth fund — known as “The Good Jobs Fund” — in July with $21.5 million, the largest fund in its history, according to the firm.
- Silversmith Capital Partners closed its fourth fund after two months with $1.25 billion in commitments from limited partners. The Silversmith team will also kick in $90 million to make Fund IV the firm’s largest to date and brings total capital raised to more than $3.3 billion since its founding in 2015.