Mercury Fund, an early-stage enterprise agency, closed on $160 million in capital commitments for its fifth fund, additionally its largest.
Generally, it’s been a busy month for enterprise capital companies saying new capital commitments. Mercury Fund joins companies, together with Mythos Ventures, Join Ventures, Fuse and Unconventional Ventures, in saying new funds this month.
Blair Garrou, co-founder and managing director of Mercury Fund. Picture Credit: Mercury Fund
Having been round for a decade now, the agency was beforehand often called DFJ Mercury. In 2013, it took on the Mercury Fund moniker when Draper Fisher Jurvetson restructured its entities. At this time, Mercury Fund has helped create greater than $9 billion of enterprise worth throughout its portfolio of over 50 corporations.
This fifth fund had an preliminary goal of $150 million and is backed by present traders and new restricted companions, together with college endowments, foundations and household workplaces. Most of the new traders are primarily based within the central United States the place Mercury invests, Blair Garrou, co-founder and managing director of Mercury Fund, instructed TechCrunch.
Houston-based Mercury Fund usually raises each three to 4 years to offer time to deploy the capital, Garrou stated.
“Some funds prior to now have taken longer to boost, however this one truly wasn’t practically as lengthy,” Garrou added. “That was as a result of efficiency of our earlier fund. We closed proper earlier than COVID, however we put it to work throughout COVID. We had some actually nice corporations in that enjoyable cycle, together with Cart.com, Otto and Sign Advisors.”
Discovering SaaS alternatives
The agency’s mannequin consists of investing in founders constructing transformational SaaS and information platforms in smaller know-how markets exterior of the coastal tech hubs. There are areas the place they don’t have the sorts of startup ecosystems or assets as their counterparts on the coast.
In talking about the place alternatives are for SaaS in these areas, Garrou stated over 5 years in the past, there was extra give attention to business-to-business because it pertains to industrial SaaS. For instance, the automotive, meals and beverage and vitality industries.
At this time, the emphasis is on vertical SaaS and entrepreneurs taking up the buyer expertise. For instance, Garrou noticed that in Otto and likewise in RepeatMD, one in every of its investments from the brand new fund. RepeatMD is a Houston-based affected person engagement and fintech platform for medical doctors promoting non-insurance reimbursed merchandise.
“You’re beginning to see these clusters of exercise of actually profitable corporations choosing up the SaaS playbook and pushing that ahead,” Garrou stated. “Again in fund three, we had been virtually fully B2B. That’s now expanded into B2B, B2C and information platforms for fund 5.”
Subsequently, Mercury has created an operationally-focused funding mannequin that helps present these assets so portfolio corporations can extra quickly develop.
A ‘center America’ fund
Mercury Fund was elevating for its fifth fund in 2021, whereas deploying capital from its fourth fund, which Garrou stated “was our greatest performing fund at the moment.” That 12 months, the agency’s portfolio had over 10 exits, he added, which appeared to make the restricted companions very blissful.
Garrou described the fundraising setting as “fairly sturdy,” noting that the agency’s mannequin got here into maturity throughout that point. When funding took a downturn in 2022, Garrou went again to Mercury’s LPs to reopen conversations, and never solely did the LPs keep on with them, however some doubled down on their preliminary funding.
And, as soon as the recession interval started, Mercury, already working with its corporations to be capital environment friendly, was actually enticing to institutional traders, Garrou stated.
“Being a ‘center America’ fund, it’s at all times difficult elevating capital counterparts, however our mannequin is simply completely different,” Garrou added. “Throughout COVID is after we noticed hybrid work turn into the norm, and firms might rent expertise from anyplace and lift capital from anyplace. That actually sat nicely with our fund being very operationally-focused.”
Along with RepeatMD, Mercury has made seven investments from the fifth fund to date. Garrou expects to make between 18 and 20 investments total. Others embody Polco, a neighborhood engagement polling platform for native and state governments primarily based in Wisconsin, MSPbots, a Chicago-based AI-driven course of automation platform for small and mid-sized managed service suppliers, and Brassica, a monetary infrastructure know-how firm growing enterprise options for various property, primarily based in Houston and Cheyenne, Wyoming.
“We anticipate to do one other two to 3 years of investing all through this fund,” Garrou stated. “Then our hope is that we’ll have one other nice liquidity interval in 2025 like we had in 2021. If that’s the case, we’d love to boost once more a while after that.”
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