In a blog post by Fred Wilson, top New York venture firm Union Square Ventures has officially announced its new $165 million fund, called The Opportunity Fund.The fund came to light late last year because of an SEC filing and Union Square were unable to comment at the time because of legal restrictions surrounding institutional fundraising.
The new fund is a later-stage fund, a shift in strategy for the traditionally early stage-focused firm. “This fund is meant to complement our core funds, not take us in a new direction,” Wilson writes. So Union Square will still do early stage deals, but have more ammo to invest either in portfolio companies or other companies they missed the first time around.
Union Square had to sit out most of the big late-stage funding rounds of their biggest portfolio companies, Twitter and Zynga, because of small fund size. It had to hurt to be diluted down by later-stage investors like DST and Kleiner Perkins even though Union Square was in those companies’ first rounds. What’s more, Union Square’s Fred Wilson is on the record that the early stage space is getting very crowded, with super angels (angels who have raised institutional funds) bidding up valuations.
A person close to the firm speculated to us that Union Square Ventures was getting “squeezed out” of competitive early stage funding deals. When you have 10 angels putting up $25,000 to $50,000 or more each in a startup’s seed round, there’s no room for a VC, the person said. They added that Union Square are “the best in the business”, a sentiment we’ve heard echoed many times by industry folks.
To avoid conflicts of interest between the Opportunity Fund and the existing Union Square funds, almost all the investors in the Opportunity Fund are previous investors in the other USV funds, and the new fund will charge management fees only on capital invested and not capital committed, which is unusual in the venture world. What’s more, Union Square is bringing in a new partner, John Buttrick, to manage the opportunity fund.
Buttrick doesn’t have a big presence online and isn’t well known in the startup/venture world, but here’s what we were able to dig up online: he started out as an M&A lawyer at big firm David Polk in Paris and New York, becoming partner, then was a partner at LimeWire Ventures, a technology private equity firm, and sits on the board of Agfa-Gevaert N.V., a public imaging technology company in Belgium. Wilson adds that Buttrick has been an advisor to Union Square since the beginning of the firm.
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