Canaan Raises $675M For Fund X, Focusing On Early Stages And ‘Home Runs’

Canaan Partners — the Silicon Valley venture firm that has backed the likes of Skybox Imaging, PrimeSense, LendingClub and Ebates — is today announcing that it has raised $675 million for its tenth investment fund. The plan for Fund X is to continue with Canaan’s track record since 2005 of investing mainly in early rounds of tech and health startups, as well as selected later stages in existing investments that it sees as “home runs,” in the words of general partner Maha Ibrahim.

Up to now, some two-thirds of Canaan’s investments have been made in technology — spanning fintech, travel, big data, cloud, enterprise, SaaS, and consumer internet — with the remaining third going into healthcare, all mostly in the U.S. Ibrahim says that this is likely to be the same proportions for this next round of investing.

If you do the math and consider that those early rounds may not be that much bigger than $10 million maxiumum, that leaves a lot of room for Canaan to be a very prolific presence for fundraising in the next several years.

In tech Canaan has proven to be a formidable investor. In addition to seeing portfolio companies selling to Google, Apple and large players from Asia, its overall returns have been some of the best in the industry. Ibrahim tells me that its funds from 2007 and 2012 (also in the $600m+ size) are in the top 10% of all funds from that year in terms of returns. This year the company has seen 12 exits of portfolio companies in the last 12 months.

If anything, I would argue that the big challenge for Canaan will be whether the firm will be able to sustain the level they’ve seen up to now.

Despite some investors’ opinion that Silicon Valley may be taking on too much risk and that we are in a bubble that is popping or about to pop, this doesn’t seem to be the world that Canaan is living in at the moment. Ibraham says that Fund X was oversubscribed and was raised “in weeks” — a record even for them. The limited partners, she says, are not swathes of newcomers panning for gold, but regulars that Canaan has worked with for years.

Ibrahim says that the lifecycle of startups, if anything, has been on a steady rise, with quality companies (and their investors) gravitating to the top of the pile.

“There’s been an acceleration of exits in the last year or two for a quite a few reasons,” she says. “We have Asian buyers interested in getting into the U.S. (such as with Ebates and Rakuten), and large companies buying into ‘white space’ (which is where companies like Cisco have been very active), and ‘home runs’ — that is companies that go public.”

A new category that is emerging, are the large corporations that are now breaking up, like HP and eBay. She believes that this will also spur more acquisitions of startups as they become more agile and look for growth. “We think that will be a harbinger of great things. Those companies have been locked up in their own internal struggles and haven’t been great acquirers.”

Along with the announcement of the new fund, Canaan is also promoting some people at the firm: Tim Shannon to general partner; Hrach Simonian to venture partner; and Brendan Dickinson, Julie Papanek and Roseanne Wincek to principal.