Section 32, a venture firm founded by ex-Google Ventures CEO Bill Maris, has closed on $525 million in capital commitments across its fifth fund, TechCrunch is first to report.
A portion of the capital will go toward early-stage investments, while the remaining will be reserved for follow-on opportunities.
The Palo Alto, California firm, which now has $2.3 billion in assets under management, has seen a number of notable exits over its six-year history. It invested in a number of startups that eventually went on to become publicly traded companies, including CrowdStrike, which went public in 2019; Coinbase, which made its public debut in 2021; and Relay Therapeutics, which took to the public markets in 2020.
Section 32 has now backed about 100 startups across a variety of software-driven industries, including infrastructure, cybersecurity, gaming and brand experiences, enterprise, quantum and precision medicine, and computational biology. It’s even invested in EV boat startup Arc. Most of its portfolio are U.S.-based companies, although it has made some non-U.S. investments.
Some of the firm’s most highly valued portfolio companies currently include Cohere, which is developing an AI model ecosystem for the enterprise and raised $270 million at a $2.1 billion valuation in June; Scale AI, which was valued at $3.5 billion in late 2020 but had to cut 20% of its staff earlier this year; and HR tech company Gusto, which recently reported that it generated revenue of more than $500 million in its most recent fiscal year after being valued at nearly $10 billion in 2022.
Maris founded Section 32 in 2017 after heading up Alphabet’s venture arm, Google Ventures (GV). The focus of the firm, says CEO and Managing Partner Andy Harrison, is to “invest in software-driven businesses in tech and healthcare that improve the human condition.”
Section 32 raised its fourth fund in 2021. Its target then and now, according to Harrison, was to raise $400 million to $500 million. It raised additional capital, a total of $740 million, in 2021 “given that market environment,” Harrison told TechCrunch.
“This time, we reduced the fund size, given the current market environment, and held the line closer to our upper bound,” he said. It has fully allocated all the funds out of its fourth fund, although all that capital has not yet been deployed.
“Like Google Ventures, we’re broad in terms of stage and tech area,” Harrison told TechCrunch. “We do most of our work around Series A and B and some later-stage investing as well.”
Image Credits: Section 32 CEO and Managing Partner Andy Harrison / Section 32
Section 32 typically makes 20-25 investments per fund, investing $5 million to $10 million in the first round, and then allocating “substantial reserves” against that position.
“As you can imagine, there is pretty significant Google-related deal flow given our history and relationships,” said Harrison, who spent over four years at Google, first as head of business & corporate development there and as a co-founder of Verily Ventures, or Google Life Sciences. Prior to leaving in 2021, he worked on the executive leadership team at Google X.
There also are many investments that were sourced from, or can be traced back to, Alphabet, including Cohere and Inceptive, which were co-founded by architects behind the 2017 Transformer paper, Exai Bio and BigHat Biosciences, which was co-founded by former leaders of Google Genomics.
“Many people we worked with at Google were working on ML projects at that time,” Harrison said. “Many of those folks have moved on to ML to AI to generative AI… We’re software investors but it turns out that many of the newest developments in software involve the application of AI and the software stack so we have a big focus in that area. And obviously, that’s been a tailwind for the firm and our portfolio.”
Still, he cautions that Section 32 is “very, very careful” about how it invests in the aggressively hyped AI sector.
“We’re sort of simplistic and disciplined about it. We believe that there’s a zone of commoditization that you have to avoid while investing in AI — the big companies like Google and Microsoft are going to give these capabilities away to consumers,” Harrison said. “So I think that the market in general is going to get access to these tools, either free or through subscriptions to software that they already have.”
As such, Section 32 is “really focused” on the application side of AI, where it could do work in areas like, like cybersecurity, the enterprise, computational biology “and other areas that we know the cloud players are not going to focus on, or they’re not going to build for specific verticals.”
So far, Section 32 has made five to six new investments out of its new fund.
In conjunction with the new fund announcement, the firm also shared that it has promoted Wesley Tillu from senior principal to partner. Tillu joined Section 32 in 2021 from In-Q-Tel, the venture capital arm of the CIA and U.S. intelligence community.