Seed-stage investor SoftTech VC has closed its fourth fund on $85m, bringing its capital under management to $155m.
The fund is significantly larger than SoftTech’s third fund, which was closed with commitments of $55m in 2011. The Palo Alto-based firm explained that it now needs more capital for follow-on deals due to an increase in the median size of Series A rounds.
SoftTech VC III has backed 55 companies, having allocated $25m to initial investments with a further $30m earmarked for follow-ons.
Softtech said, “Things worked perfectly until we saw the median size of Series A rounds increase from $5-6m to $8-10m in the last year – with a few of our companies raising up to $15m.
“Not a bad problem to have given the traction that they had developed, but these large rounds threw off our reserves model. So we decided to increase the size of Fund IV to allow for a larger follow-on budget.”
The new fund will make initial investments of at least $500,000 with the flexibility to go over $1m to reach its target ownership of seven to ten per cent.
SoftTech plans to back 50 companies over three years. Fund IV has invested in companies including DocSend, Panorama Education, Halo Neuroscience, Niche, Stitch, Soldsie and Sapho since its first close in October. Last year the firm participated in a $4m funding round for TakeLessons, an online service marketplace for music lessons in the US.
The firm’s target sectors include mobile infrastructure and services, vertical software-as-a-service, cloud infrastructure, B2C services and connected devices, and marketplaces.
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