Felicis funded 50% more deals last year than in 2021, some as prices were still rising — and it says it has no regrets

Felicis, a now 17-year-old, San Francisco- and Menlo Park-based venture firm, is announcing today that it has closed its ninth flagship fund with $825 million, compared with the $600 million core fund that it announced in the summer of 2021. The vehicle brings the firm’s total assets under management to exactly $3 billion, and it took just three months to raise, it says.

It’s a feat in the current market, but Joanna Rupp, managing director of private equity at the University of Chicago — which is among Felicis’ limited partners — suggests is boils it down to the numbers, saying in a statement to TechCrunch that Felicis has “delivered strong results for the endowment.” (Some of Felicis’ exits include the IPOs of Shopify, Adyen, Recursion and Matterport, along with acquisitions, like Credit Karma’s sale to Intuit and Fitbit’s 2021 sale to Google after first going public back in 2015.)

The question is whether the returns of Felicis will look as strong in the coming years. Its most recent fund was aggressively invested into the frothiest market on record in terms of dollars invested and startup valuations. Investor Chamath Palihapitiya summed up the fears of many institutional investors at a recent investing conference, saying despite the “successive amounts of capital” that startups raised during the pandemic and the ensuing “valuation creep” they enjoyed, it “won’t translate into what the actual money is that [VCs] are going to get back.”

In an interview this week, firm founder Aydin Senkut said he’s not concerned and suggested the best returns for Felicis may be yet to come, primarily for two reasons.

First, though the firm’s partners plowed a lot of money into the market in a short span of time, they invested much of it in earlier-stage companies. One of these is Prenuvo, a startup based in Redwood City, California, that created an alternative to traditional magnetic resonance imaging that can be used to screen and diagnose more than 500 medical conditions, including most solid tumors at Stage 1, and that last fall raised a $70 million Series A round that Felicis led.

Another is Meilisearch, the four-year-old Paris-based creator behind an open source search engine project of the same name and which closed a $15 million Series A round last fall led by Felicis.

“When you skew a bit earlier, the check sizes go down a bit more on average and you’re [getting more of the company] in the deal,” says Senkut.

Felicis also bets on winners, he insists, and in his experience, it doesn’t matter what the “entry” price is if you’re betting on the right horses. “People looking only at valuations are missing a big piece of the equation,” Senkut says. “Entry point is important, but it’s the companies you choose and whether they exit or not,” he adds.

He notes that when Felicis invested in a deal at 100 times revenue multiples in 2014, “everyone thought we were insane,” but the company, he continues, “grew 1,000 times revenue from there.” That deal was an investment in what has become Australia’s most valuable privately held company, Canva, which was valued at $40 billion by investors in the fall of 2021, though another of Canva’s biggest investors, Blackbird,  marked down its own valuation of the company to $25.6 billion last summer.

Other companies that attracted big checks more recently from Felicis — and that the firm would write again, Senkut suggests — include Supabase, a two-year-old, Pleasanton, California-based open source database-as-a-service (DBaaS) company that raised $80 million in Series B funding led by Felicis in May of last year; Weights & Biases, a 4.5-year-old, San Francisco-based machine learning operations company that raised $135 million in Series C funding led by Felicis in the fall of 2021; and Runway ML, a four-year-old, New York-based maker of video editing software that is one of the two startups behind the popular AI text-to-image model Stable Diffusion and which raised $50 million in Series C funding led by Felicis in December.

Indeed, in conversation, Senkut talks proudly of the merits of each, saying of Runway, for example, that it’s precisely the kind of investment Felicis likes because it is the “original creator of the IP” on which it is built, and it has a big and growing base of customers, including a variety of Fortune 500 companies already using its tech for a variety of purposes, including, per a recent Forbes piece, CBS’s “Late Show with Stephen Colbert” and New Balance.

Saying your cost conscious “sounds smart and, to some LPs, makes them feel better,” says Senkut. “But you can’t worry about valuations when you’re investing in a company that’s one in 10,000” in terms of its potential.

Felicis funded 50% more deals last year than in 2021, some as prices were still rising — and it says it has no regrets by Connie Loizos originally published on TechCrunch