Mercury Fund closes largest fund to put money into SaaS startups between the coasts

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 asserting new capital commitments. Mercury Fund joins companies, together with Mythos Ventures, Connect Ventures, Fuse and Unconventional Ventures, in asserting new funds this month.

Having been round for a decade now, the agency was beforehand often known as DFJ Mercury. In 2013, it took on the Mercury Fund moniker when Draper Fisher Jurvetson restructured its entities. As we speak, 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 current buyers and new restricted companions, together with college endowments, foundations and household places of work. Most of the new buyers are based mostly 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 provide time to deploy the capital, Garrou mentioned.

“Some funds up to now have taken longer to boost, however this one really wasn’t practically as lengthy,” Garrou added. “That was because of the 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 Signal Advisors.”

Discovering SaaS alternatives

The agency’s mannequin contains investing in founders constructing transformational SaaS and knowledge platforms in smaller expertise markets exterior of the coastal tech hubs. There are areas the place they don’t have the sorts of startup ecosystems or sources as their counterparts on the coast.

In talking about the place alternatives are for SaaS in these areas, Garrou mentioned over 5 years in the past, there was extra deal with business-to-business because it pertains to industrial SaaS. For instance, the automotive, meals and beverage and vitality industries.

As we speak, the emphasis is on vertical SaaS and entrepreneurs taking on the patron expertise. For instance, Garrou noticed that in Otto and likewise in RepeatMD, one in all 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 mentioned. “Again in fund three, we have been virtually totally B2B. That’s now expanded into B2B, B2C and knowledge platforms for fund 5.”

Subsequently, Mercury has created an operationally-focused funding mannequin that helps present these sources 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 mentioned “was our greatest performing fund at this time.” That 12 months, the agency’s portfolio had over 10 exits, he added, which appeared to make the restricted companions very completely satisfied.

Garrou described the fundraising surroundings 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 buyers, Garrou mentioned.

“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 corporations might rent expertise from anyplace and lift capital from anyplace. That basically sat effectively with our fund being very operationally-focused.”

Along with RepeatMD, Mercury has made seven investments from the fifth fund to this point. Garrou expects to make between 18 and 20 investments general. Others embody Polco, a neighborhood engagement polling platform for native and state governments based mostly 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 expertise firm creating enterprise options for various property, based mostly in Houston and Cheyenne, Wyoming.

“We count on to do one other two to a few years of investing all through this fund,” Garrou mentioned. “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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