A decade ago, Austin-based LiveOak Venture Partners took a few years to put together its first $100 million investment fund.
Today, LiveOak Venture Partners announced Fund III, a $210 million oversubscribed fund that took just three months to close. It is the largest institutional Texas-focused, early-stage tech venture capital fund raised in more than a decade, according to the firm.
“We could have raised significantly more if we kept it open,” said Krishna Srinivasan, LiveOak Co-founder, and partner.
The fund’s investors recognize LiveOak’s strategy works, and its partners have the resolve and experience to get deals done, combined with the white-hot Texas market, Srinivasan said.
To date, LiveOak Venture Partners, founded in 2012, has almost $500 million assets under management. It has invested in almost 50 Texas-based companies which have gone on to raise more than $1 billion. One of its early investments, Austin-based CS Disco went public earlier this year on the New York Stock Exchange with a $3 billion market cap.
For Fund III, 90 percent of the capital came from institutions and 40 percent from new investors, Srinivasan said.
LiveOak Venture Partners will begin making investments from Fund III in 2022. It expects to make investments in 25 to 30 companies with the first check ranging from $1 million to $5 million with $10 million to $15 million investment over the lifecycle of the company, Srinivasan said.
“This way we can support companies a lot longer as well as we’re able to write bigger first checks with the fund,” he said.
With the new fund, core things don’t change like the fund will be focused on early-stage Texas startups, Srinivasan said. To date, all investments have been in Texas-based companies. Its portfolio includes Osano, Trust Radius, Eventus, Imandra, ConverseNow, SchooLinks, LitLingo, Spyderbot, and more.
Austin and Texas were under-capitalized markets when LiveOak Venture Partners launched and even though dozens of new firms have moved in, the market is still under-capitalized for the number of quality deals here, Srinivasan said.
“Undoubtedly there are more funds in this market,” Srinivasan said. “Undoubtedly there is a lot more opportunity in this market. It continues to be capital starved related to the size of the opportunity. So, we are in an attractive spot in relation to the companies and ideas in comparison to the amount of capital available.”
And quality deal flow in Austin is accelerating right now compared to the past 10 years, and has never been more robust, Srinivasan said.
“And it’s accelerating primarily because of talent,” he said. “Talent today in this market is better than ever before. Great talent leads to lots of exciting company formations. And lots of company formations lead to high-quality deal flow.”
And the deals are across the board and not focused on one industry. Texas is a diversified market, and it is getting to be even more diversified today, Srinivasan.
“Software is all-pervasive these days,” Srinivasan said. “Texas has so many industries with large companies. The intersection of traditional industries with software is creating lots of unique opportunities.”
For example, real estate crossed with tech leads to interesting deals like Homeward, OJO Labs, and Opcity, which are all LiveOak Venture Partners investments, he said.
Lots of law firm powerhouses in Texas led to legal technology startup Disco, Srinivasan said.
“Overall we are seeing really interesting diversified activity across a wide range of markets here which again goes back to the strength of Texas,” Srinivasan said.
When LiveOak Venture Partners started it pitched the story that the franchise was going to be early investors in category-leading companies that come out of Texas, Srinivasan said. And LiveOak Venture Partners would serve as lead directors and play an active role in the lifecycle of the business, he said.
Now, it doesn’t have to explain that vision. LiveOak Venture Partners’ track record speaks for itself, Srinivasan said. The company has had an IPO with Disco within seven years of formation, a sale of Digital Pharmacist for $125 million, a sale of Opcity for $200 million, and other exits.
“Success begets more success,” he said.
LiveOak Venture Partners specializes in early-stage companies that require a lot more help, Srinivasan said.
“That’s what we provide with our local approach,” he said. “We have optimized the way we practice our business to be the best local investor for great local companies in Texas. I think entrepreneurs do take notice. We provide a unique value proposition and hopefully, that resonates with great entrepreneurs.”
In the last few years, a number of new VC firms have set up shop in Austin including 8VC, Breyer Capital, Mithril, Sapphire Ventures, Firebrand, Capstar, Moneta Ventures, CAVU Venture Partners, and Trust Ventures.
Overall, more Venture Capital firms in Austin and Texas, in general, is better, Srinivasan said. It leads to more capital available in follow-on rounds of capital, he said.
Austin saw $981.4 million invested in 76 deals in the third quarter. For the year, Austin companies have attracted a record $3.8 billion in venture capital in 265 deals, according to the Q3 Pitchbook-National Venture Capital Association Venture Monitor report.
“More capital coming into this market is healthy,” he said. “It’s good for entrepreneurs. It’s good for our companies so we can do larger, better syndicates with lots of follow-on financing. I think it’s all immensely positive.”
