The people at Collaborative Fund thrive on a challenge. Instead of following the traditional venture capital model of investing in software-as-a-service (SaaS) companies, they prefer to fund businesses in industries like climate, health, and food. To add another layer of complexity, they specifically seek out companies focused on consumers, who are known for their unpredictable attitudes and constantly changing preferences. And as if that wasn’t enough, they chose to raise their sixth flagship fund during a time when potential investors are becoming more cautious and selective.
Despite these obstacles, Collaborative Fund’s strategy has paid off. According to the firm, they recently raised $125 million for their sixth flagship fund in just over 90 days, a process that is usually much longer.
“This fundraising environment is tougher than any I’ve seen since starting the firm well over a decade ago,” said founder and managing partner Craig Shapiro in an exclusive interview with TechCrunch.
Shapiro believes that the current state of venture funding has actually worked to their advantage. “We were motivated to fundraise because we think the ’24 vintage is going to be a good one,” he explains. With the slowdown in venture funding, startups’ valuations have become more reasonable, and there is more time to conduct thorough research and analysis on potential investments. And because consumer-focused investments have fallen out of favor in the VC world for the past few years, there is less competition for promising companies. “Those are two compounding factors that actually make us more excited to be investing right now,” Shapiro says.
The Sophisticated LPs
Although some investors have been hesitant to make commitments due to rising interest rates and political uncertainty, Shapiro says that Collaborative Fund’s investors are not among them. “What we saw is that the more sophisticated LPs, who have a very long term view, understand that narrative,” he explains. “They understand that markets ebb and flow.”
Partner Sophie Bakalar adds, “We had significantly greater demand than we could accommodate.” Shapiro attributes part of this demand to the fact that Collaborative Fund has recently returned capital to its LPs. Some of the firm’s early investments, such as Reddit’s recent IPO and Scopely’s $4.9 billion acquisition by Savvy Games Group, have been highly successful. “We have one LP that told us that they haven’t received a distribution from any of their venture funds in almost 18 months. The fact that we were distributing capital set us apart.”
While Collaborative Fund does not disclose the names of its LPs, they do mention that their investors come from a diverse range of backgrounds. These include endowments, foundations, high net-worth individuals, a large asset manager, and “a large Singaporean organization with a strong focus on PE and VC investments.” The majority of the firm’s current LPs have also committed to the new fund.
A Focus on Seed Stage Companies
As a Collaborative flagship fund, the new fund will primarily focus on seed stage companies. Approximately half of the fund will be reserved for initial investments, while the other half will be used for follow-on investments.
Shapiro is particularly interested in exploring how emerging companies can address the ever-changing landscape of consumer spending patterns. “It’s clear to us that how people are spending their money, where they’re keeping their money, how they’re divvying it up, where they’re investing it – those are all areas that we’re excited about,” he says.
A Common Thread: Climate
Another common theme among Collaborative Fund’s portfolio is climate and sustainability. “We break out climate sustainability as another category,” Shapiro explains. “But if you were sitting like a fly on the wall in our team meeting, we think of that really more horizontally across all these verticals. The food we’re eating, microplastics, air quality – they’re all linked. Climate and sustainability is an underlying foundation to all of these categories.”
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