This morning OpenView Venture Partners announced that it has closed $450 million for its new, sixth fund. The capital pool is its largest to date, coming in at roughly 50% larger than its preceding fund five.
OpenView is based in Boston, but invests globally. The $450 million fund’s future existence has been known since at least November of last year, thanks to an SEC filing.
The firm’s investment focus, two of its partners told TechCrunch during separate interviews, is not changing with its new capital. Instead, OpenView will continue to focus on what it calls “expansion stage business software,” according to partner John McCullough.
That’s a way of saying business-focused software startups that have between $1 million and $10 million in annual recurring revenue, or ARR. To be more specific, OpenView’s Mackey Craven told TechCrunch that around 80% of its lead deals are into companies with $1 million to $5 million in ARR, with 60% going into companies with between $1 million and $3 million in ARR.
Given that expansion-stage startups are modest in terms of revenue scale, why did OpenView raise so much more capital in its new fund than its prior installments, if it is pursuing the same strategy?
According to McCullough, the firm ran the math on the number of investments it wanted to make — hoping to make 15 to 17, more than the 13 it did out of its preceding fund — the amount of money it needed for follow-on investing, and some constraints it ran into in prior funds when it had to decide between a net-new investment and adding more capital to an existing winner. All that added up to a larger number.
The investor told TechCrunch that OpenView had a lower bound target of $350 million, and a hard max of $450 million for the fund.
New capital is fun and all, but I wanted to know a bit more concerning how the fund views some trends in the tech space that I’ve tried to keep an eye on, namely API-delivered startups, no-code/low-code and insurtech. On the API front, Craven seemed generally bullish, saying that there has been “greater opportunity for software businesses to be built around an API as a product” in recent years, adding that as many API-delivered startups tend toward usage-based pricing, they can also sport attractive net retention metrics.
We riffed on the no-code and low-code worlds as well, noodling on the distinctions between services that allow for greater customizations by non-developers and products that allow for the creation of net new applications sans coding. Both wind up landing inside the no-code and low-code buckets despite being rather different. Regardless, are startups that sell software building in more customization and flexibility? Yes, says Craven. Expect the line of what counts as no-code capability and what is merely neat customizations to blur as time passes.
And, finally, on the insurtech point, Craven indicated that because most of the insurtech world is more financial services than business software, it largely falls outside of their purview. Perhaps Noyo would count as both insurtech and expansion-stage business software?
OpenView has lots of new capital to keep running its playbook. It’s not the only business-focused software VC out there. Shasta’s another. There are more. But with more capital than ever, OpenView has invited more scrutiny onto itself, its results and its new investments. Let’s see where it puts the money to work.