(Bloomberg) -- Costanoa Ventures has raised $394 million for two new funds, financing that comes at a time when many small and midsized venture firms are struggling to bring in fresh capital.
The California-based firm invests in young companies — from the seed stage through Series A — and bets on sectors including financial technology, artificial intelligence-driven enterprise software and defense startups. The money will be split between a new $275 million early-stage fund and a $119 million fund for follow-on investments.
This is the fifth main fund for Costanoa, which got its start in 2012. Since then, it’s had a handful of exits, including Datalogix, which sold to Oracle Corp. for more than $1 billion in 2015. It counts Demandbase Inc., Quizlet Inc. and Alation Inc. in its portfolio as unicorns. With the new financing, Costanoa is also promoting partner John Cowgill to general partner.
Greg Sands, founder and managing partner at Costanoa, said the firm was able to raise significant new capital amid a larger venture slump because investors liked that it didn’t get carried away in the boom of 2021. Sands said Costanoa “stayed on strategy, stuck to their lane and stayed on the same investment pace,” rather than bid up valuations. Sands is also optimistic generally for startup investment, in part because he believes the M&A environment is “slowly improving,” and he’s hopeful about a decline in interest rates.
Martina Lauchengco, a partner at the firm, said that its investment returns also helped attract limited partners. “Our early-stage funds are all in the top quartile or decile of their cohorts,” she said. “We consistently target at least 3-5x return on those funds.”
©2024 Bloomberg L.P.
