Fidelity Investments has raised $250 million in its first-ever venture capital fund. However, according to portfolio managers, it is far from an emerging management company.
Fidelity, which has $5.5 trillion in discretionary assets, has been investing in growth-stage companies for more than 15 years through some of its mutual funds. Currently, about half of mutual funds own stock in at least one private company. The reason is that more companies are staying private for longer periods of time. Fidelity and other investors want to become shareholders before the IPO because there are fewer public stocks to choose from and less upside to capture.
Fidelity invested in Facebook at a valuation of $61 billion in 2011 and Spotify at a valuation of $4 billion in 2012, and is portfolio manager of Fidelity Venture Capital Fund I, a global Investor Karin Fronche has invested in other companies that have grown significantly since Fidelity became a stakeholder. Fidelity’s head of private equity told institutional investors.
“We’ve been doing this for many years and are pretty good at it. We need to give our customers pure access to these companies, not just access to a piece within our public mutual funds. That’s how we worked on the fund and ended up launching it this year,” Fronke said.
Still, Fidelity only manages about $18 billion in privately held companies.
“While it is a small percentage of our assets under management, it is critical to our investment process. We need to understand what private companies are doing to disrupt the world. How is ByteDance disrupting Facebook? How are these AI companies disrupting enterprise software? This is an important part of our strategy,” Fronke said. said.
The past few years have been rough for most venture capital firms, and more pain is likely to come, with some investors turning to “on-demand” to help startups completely reevaluate their portfolios. GP” is employed. CRV, one of the oldest companies in the industry, has withdrawn $275 million from its $500 million Select Fund that it has not yet invested, citing market conditions and company valuations as too high for the potential return. The plan is to return it.
But some venture capitalists think the predicament could make 2024 and 2025 a good time to invest. Fidelity Venture Capital Fund I closed in September after raising $250 million from wealthy individuals, family offices and wealth management firms in just four months.
The fund will invest in mid- to late-stage private companies in a variety of sectors around the world, but particularly in technology, media and telecommunications in North America. The company has already invested about $31 million in 10 companies, including SpaceX, cloud-based infrastructure company Coreweave, and defense technology company Anduril.
The creation of the first venture fund was several years in the making, with Fidelity exploring ways to co-invest in companies alongside its own mutual funds. Meanwhile, demand for private market investments from high-net-worth individuals and their families continued to grow.
No wonder this fund has so few institutional investors. Financial institutions are looking for managers who can analyze track records and fund performance. Convincing them may have been just a slow road to raising $250 million, but Fidelity wanted to put the money to good use.
Still, startup venture capital firms with experienced general partners (companies raising their first or second round of funding) are often able to raise funding from institutional and individual investors. Fidelity’s first fund could have done the same thing given the asset manager’s brand and reputation, Fronke said.
“I always say, we’re not upstart directors. We’ve been doing this for over 15 years, and this is just our first vehicle,” Fronke said.
