The world’s most powerful banks and financial companies can’t raise money if their life depended on it. But for the premiere venture capitalists, money still seems to be falling out of the sky like puffy snow flakes in the Sierra Nevadas.
Today, the Mayfield Fund, a top-tier Silicon Valley VC firm that was founded in 1969 by industry pioneer Tommy Davis, announced the closing of a $395 million fund, its thirteenth fund. That would make it one of the largest VC funds raised this year. “We’re optimists who believe that the magic of Silicon Valley and entrepreneurship won’t die just because we have some massive gyrations,” says Mayfield managing director Yogen Dalal.
Mayfield, which made its bones investing in companies such as Tandem Computer, Atari, and 3Com, said it will use the money to invest in a range of technology sectors, including chips, business software, consumer media and green technology. Mayfield’s recent hits include investments in Slide, Trigo (acquired by IBM) and JotSpot (acquired by Google).
Dalal is particularly bullish on startups that make software and services that help large and small companies to run their business on the Internet–a group he dubs the “Internet 500.”
“The biggest opportunities are still in satisfying the needs of the Internet 500,” says Dalal. “Now, more and more companies are doing business on the Internet. Yet they don’t have the engineering talent to conduct their business. So they are buying software from startups.”
Mayfield has only made two investments in green technology companies. One was in LatticePower, a Chinese maker of LED lightbulbs; the other was in Servomax India, an Indian company that makes more efficient and cheaper power generators for cell phone towers.
But Dalal expects the firm will step up its activity with the new fund. Mayfield is shunning investments in companies developing new types of energy, since they tend to suck up capital like a vacuum. Instead, the firm is targeting companies focused on energy management and conservation. The strategy also plays to the firm’s strengths in building software companies.
“The smart electric grid is like a supply chain,” says Dalal. “We can make the grid smarter like we made the supply chain smarter.”
Despite Dalal’s sunny disposition, he says the financial crisis could hurt companies that have failed to raise money in the last year–otherwise known as “recession rounds.” To ride out the bad times, Dalal says the firm is now budgeting that startups will need about 20% more capital than they did before the downturn.
“We have been encouraging our companies to raise capital,” he says. “The most important thing for Silicon Valley companies is to make sure they have enough capital to last 18-24 months of turbulence.”
Update: Mayfield did not invest in Apple. However, in 1976 the firm did invest in Atari.
Creative Capital 