SOSV III — New Fuel for Startups
People certainly know that VCs invest capital in startups. But lots of folks don’t know where that money comes from.
The people/organizations which invest money into VCs are called “LPs”, and generally these are foundations, pension funds, corporations, and executives and wealthy individuals with knowledge of how high tech works.
The people who invest money for the VC into the startups (portfolio companies) are called “GPs” (general partners), although terminology varies widely from one investment firm to another. At SOSV, we used to call our GPs “Investment Partners” until recently. Due to the nature of accelerators, there are a wide range of other staff involved in supporting and selecting our investments.
At SOSV, we have 8 GPs of our overall 90+ staff.
Up until 2015, SOSV’s accelerator model was powered completely on internal capital, from investments by our founding partner (me) and our team of GPs. As of December 16th, 2016, we’ve now closed on SOSV’s third fund, a $150m fund dedicated to our accelerators and the companies that come out of them. This brings SOSV to $300m in assets under management. It’s a big step for us, and a big recognition of how far the “deep tech, vertical” accelerator movement that SOSV pioneered has come.
We have 65 LPs in this new fund, and it’s absolutely great to be supported by a wide range of old-time friends and new partners in giving us the fuel to continue forward.
SOSV stepped into the big gap left behind by VCs in the last 10 years as fund sizes got larger and larger, while the typical VC model hasn’t scaled. With larger numbers of “early stage” investors putting $10m or more into Series A rounds, there became a huge need, and hole, in the market, for investors who would fund the earlier-stage startups that need to get to the multi-million dollar run-rate that Series A investors now expect.
In general, venture capital doesn’t scale.
With the accelerator model, in the case of accelerators that are run by experienced entrepreneurs, early stage companies can get huge amounts of intellectual property, knowledgeable guidance, and the seed capital that it takes to go from nowhere to somewhere. The unique thing about this model, is that it is a model that scales. With communities of highly selective startups with critical skills in core market areas, startups benefit greatly by the knowledge of community that they join (hardware, life sciences, food, etc), while investors and mentors who have experience and interest in an area get deeply involved as well.
In the last 6 years, SOSV has grown to become the third most active seed investor in the world. As well as the #1 investor in life sciences, #1 in hardware, #1 in disruptive food, and #1 in china cross-border internet & mobile.
SOSV is unique as well, amongst venture funds, for being more than 50% funded by the GPs themselves. That’s right, we are putting our money where our mouths are. Many venture funds only put 1 or 2% of the capital in by the investment partners (GPs), while exemplary funds put between 10–20% of the capital into the pot from the GPs. At SOSV, we’re fully committed, and we believe in the exceptional value our startups are creating.
Below is the press release for SOSV III. But first, I have to thank all the GPs at SOSV that made this fundraise possible, by running the best accelerators in the world. Cyril Ebersweiler and Duncan Turner, of HAX. Arvind Gupta and Bill Liao of IndieBio and RebelBio. William Bao Bean of Chinaccelerator and MOX. Shawn Broderick of Food-X and Stephen McCann, who runs SOSV’s back office and legal operations. And the 90 staff at SOSV who run these programs and support the more than 500 companies in our portfolio since 2007. Thank you team!
SOSV, the Accelerator VC, closes $150 million Fund III
— investing $50mm per year through HAX, IndieBio, Chinaccelerator and Food-X —
Jan 3, 2017 — (Princeton, NJ) — SOSV, the accelerator-based venture capital firm, closed $150 million in its first fund open to external investors, SOSV III on December 16th. SOSV runs the world’s #1 accelerators in hardware, life sciences, disruptive food, and China cross-border startups.
With more than 150 startups backed annually through its accelerators, SOSV is also recognized as the world’s third largest seed investor by volume. SOSV’s accelerator model takes a small stake in startups and provides a framework and community where startups get further and faster than they could on their own.
“Since 2010, we’ve provided follow-on funding to those companies who develop significant traction and financing support,” said Sean O’Sullivan, SOSV Managing Partner. “It’s a proven model…giving us both extraordinary quality and incredible deal flow.”
The 65 investors in SOSV III range from formerly-backed founders and tech executives to major family offices, private foundations and multinational corporations. LPs include the IFC of the World Bank, the largest global development institution focused on the private sector in emerging markets; the Lemelson Foundation, focused on improving lives through invention; The Russell Family Foundation, a philanthropic enterprise advancing sustainability and leadership in the Pacific Northwest; Alex Rigopulos, Chairman and co-founder of Harmonix Music Systems; Bobby Voicu, co-founder of social gaming site MavenHut; and Austin Hearst.
SOSV is led by founder and managing partner Sean O’Sullivan alongside six investment partners, all of whom come from operating backgrounds building multi-million dollar startups, including three IPOs.
SOSV’s mission — enabling startups to go further, faster — has proven out in over 500 early-stage investments since 2007, with a net IRR of over 30% since the formation of SOSV in 1995. Example portfolio companies include MakeBlock, Clara Foods, NextThingCo, FormLabs, Breather, GetAround, Greenblender, Memphis Meats, Harmonix and BitMEX.
SOSV, the Accelerator VC, has $300 million in assets under management. Founded in 1995, SOSV’s investments focus on early-stage startups selected from 4,000 companies applying every year through http://SOSV.com. A large network of follow-on VCs invest another $200m into SOSV startups annually.
Investment, in both cash and intellectual capital, is deployed via SOSV-run global accelerators:
• life sciences — IndieBio (San Francisco) and RebelBio (Cork, Ireland) • hardware/robotics — HAX (Shenzhen, San Francisco) • China-cross border Internet/mobile — Chinaccelerator (Shanghai) and MOX (Taipei) • disruptive food — FOOD-X (New York)
For more information: Audrey Chen, SOSV Investor Relations email@example.com
Originally published at sosv.com on January 3, 2017.