Growth investors could basically look at three to four key performance indicators, Ephrati said. Last year, as public markets traded high, private valuations trended up as investors deemed private companies on par with the market.Īnd fast decision-making was at a premium. Prior to this most recent fund close, the firm has spent around $3 billion in growth dollars over the last two years with around 60% of that committed to portfolio companies. Further out is more difficult to predict as you are not able to control all the variables, said Ephrati. The three-person team supports portfolio companies by honing pitch decks, building a data room, benchmarking performance, stress-testing operating plans, and ultimately brokering introductions with investors. The team’s goal is twofold-“to work with founders as thought partners on their journey to build a large business,” said Ephrati, and “to independently challenge the follow-on decision and the growth investment that we make.” Rather, Lightspeed’s investment answered a crucial question: Did the firm want to increase its exposure in this company? The answer in the case of Alloy was yes.Įphrati’s reinvestment team plays a crucial role in such decisions. “We didn’t see it as just a bridge or an extension,” said Ephrati on the investment. A C-extension a year later in September 2022 added $52 million in funding with a $100 million valuation uptick at a $1.5 billion pre-money valuation led by Lightspeed Venture Partners and new investor Avenir Growth Capital. Lightspeed led the initial Series C of $100 million, which valued the company at $1.4 billion in 2021. One of these opportunities for Lightspeed was an extension round into Alloy, an identity verification platform used by banks and financial institutions. “That’s how I lose money, if I don’t double down into the right opportunities in our portfolio.” I need to pick the winners,” said Ephrati, referring to the firm’s investment into portfolio companies. The team has been involved in roughly 200 deals in three years-around 65 deals a year. This reinvestment team is a new program which runs a fundraising bootcamp for portfolio companies to plan their next funding. We spoke with partner James Ephrati, who joined Lightspeed more than three years ago to create a practice around follow-on fundings. James Ephrati, partner at Lightspeed Venture Partners Now, the Silicon Valley-based firm founded in 2000 with offices around the globe just needs to decide how to spend it all. Lightspeed Venture Partners has raised $4.6 billion across two growth funds in 2022, the largest growth funds raised in its 22-year history, in a market where large fundings at high valuations have slowed significantly.
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