Scale Venture Partners announced Wednesday that it closed its third fund of $250 million, and is looking to finance SaaS, online marketing and healthcare startups. The firm began deploying the money in May and has already invested $68 million into companies, including new investments in ExactTarget, HubSpot and Oraya Therapeutics.
Within IT, Managing Director Kate Mitchell said the firm will focus on open-source SaaS models, as well as online marketing and what the firm calls “Data center 2.0” that can support new mobile consumer habits and improve cost- and energy-efficiency.
Mitchell said the firm is particularly interested in location-based marketing. “The challenge there the complexity, because it’s putting together mapping, search and user interaction around a location. How to make that accurate and avoid fluff data and provide data that changes constantly—the Starbucks that was on the corner two months ago is not there any more—is complex and that’s what makes it fun.”
Many VC firms have raised smaller rounds of capital in 2009 or closed shop completely, both because of the recession and because of the poor performance in general of the venture capital asset class. Mitchell says that the pullback in dollars to venture capital may be at a turning point. “Our industry delivered great returns from ‘85 to ‘95. We started getting paid for future delivery of returns in the late nineties that wasn’t sustainable […] What you begin to see toay and why we’re excited about investing a new fund in 2010… is not only do I have fewer competitors looking at every deal in the venture landscape, but the end company itself is not trying to compete on price against 50 competitors—there may be 3 to 10 people in a given sector. So the supply and demand of good ideas and capital are in better capital right now.”
Scale had a decent run in 2009, with 2 exits and an IPO filing. Omniture was acquired by Adobe for $1.8 billion and ScanSafe was acquired by Cisco for $183 million. Medical device company Alimera Sciences, filed its S-1 in November.
The firm’s newer LPs committed money, she said, in part because they think this is one of the better times to be in the cycle now that the industry has right-sized.
Scale is based in Foster City, California and the firm’s managing partner Rory O’Driscoll will be attending Vator Splash this February 4th.
