TCV closes record $3B fund to invest in consumer internet, IT infrastructure and services

On the back of a strong showing for portfolio company Spotify going public last year and several biggies like Airbnb also slated to list very soon, VC firm TCV has announced its latest and biggest-ever fund, the $3 billion TCV X, which has now closed and will start getting invested “soon,” the company tells me.

TCV’s previous fund — the $2.5 billion TCV IX — was closed in 2016 and focused on growth rounds. The firm says that it has made 21 investments out of that fund to date. Recent investments have included travel platform Sojern, Tour Radar, home-exercise startup Peloton, activity booking platform Klook, ByteDance, LegalZoom and more.

“The amount we raised is about the opportunity in tech investing, it’s large and continues to grow,” Nathan Sanders, TCV GP and COO, said in an interview today about this latest fund. “We are not looking to have explosive growth but we’re increasing our size to meet the opportunity. It’s bigger than what we had before but we will stay focused and disclipined.”

TCV typically invests between $30M and $300M in companies and has over the years backed some of the most iconic companies in the tech world, including Facebook and Netflix.

Originally, this round was aimed at $2.5 billion, according to reports from last year. The larger size, compared both to that initial target and to TCV’s previous funds, underscores a bigger trend of more money getting poured into the tech industry, fuelled by huge exits at IPO or acquisition, and a generally rising tide for tech overall.

Startups are increasingly raising rounds in the hundreds of millions of dollars. Crunchbase estimates that there were some $300 billion collectively invested in equity rounds in 2018, a high-water mark for the industry. Within that, deal volume was up 32 percent and dollar volume was up 55 percent over 2017.

For larger firms like TCV, that essentially spells raising more to spend more in order to stay in the game.

Sanders confirmed that he thinks the larger fund sizes and larger rounds in general both were drivers in TCV going for $3 billion this time around.

He added that while some are legitimately asking questions about startups that are staying private for too long while continuing to tap into private funding, racking up sky-high valuations on paper in the process, this isn’t translating to pressure for TCV’s portfolio companies to jump into anything soon themselves.

“The amount of capital we’re seeing getting invested in high-growth companies means there are an increasing number of options for those companies,” he said. “Some will choose to stay private longer and some are using that amount of capital to grow faster. Our number-one priority for our companies is to help them grow and if the company is able to do that in whichever way is best, then the returns will follow.”