Austin venture capital firms every entrepreneur should know

March 30, 2016

Austin’s venture capital landscape is a frequent topic of debate among local tech entrepreneurs, investors and observers. On one side, some claim there’s a gap in available capital here, especially for growth- and later-stage companies, resulting in lower valuations and small exits.

Another perspective is that there’s plenty of capital, but Austin’s tech tradition simply favors B2B companies, which take longer to demonstrate market traction than the B2C models of today’s digital media, on-demand service and sharing economy unicorns.

However you see it, you can’t understand the landscape without knowing who’s shaping it. To help you find your way, we’ve compiled this list of local funds focused on investing in Austin tech companies.

 

Seed funding and angel investors

Funds under management: $25 million

Focus: Early-stage seed investments for emerging entrepreneurs.

News: Microsoft announced its acquisition of Fantasy Sales Team in August. Ridescout was acquired by car2go North America in September 2014.

Notable investments: Fantasy Sales TeamRideScoutEverfestset.fmAlertMediaUnbillIdealSpot

 

Funds under management: $64 million invested by individual members

Focus: More than 140 member angel investors with expertise in a variety of industries and functions have invested in more than 110 companies since CTAN was formed by Jamie Rhodes as a not-for-profit in 2006.

News: Recently ranked the most active single-chapter angel group in the U.S. by the Angel Resource Institute.

Investments: CSIDPhunwareLocaleurBoxerApptiveClearBladeCurbInfinite.ioOrdoroStudent Loan Genius.

 

next step capital partners austin vc firms

Focus: Co-founders Dan Keelan and Patrick Drew target small businesses in Texas with a proven revenue-generation model, for investments ranging $250,000 and $500,000

More info: Their website provides clear and detailed information about what they’re looking for in portfolio companies, and it’s easy to apply for investment through their detailed application form.

 

Funds under management: Undisclosed

Focus: Perhaps best known as an accelerator and coworking space, Capital Factory also operates a venture fund. (Editor's note: Even we missed it when we first published this list.) The fund, directed by Front Gate Tickets Founder Mellie Price and Chaotic Moon Partner Andrew Busey and managed by Capital Factory co-founder Josh Baer, makes equity investments in Austin-based companies exclusively.

News: The fund recently invested in eRelevance, Student Loan Genius and Aceable.

Notable investments: OwnLocalLynx Laboratories (acquired by Occipital last year) and Dropoff

Funds under management: $200 million

Focus: Entrepreneurs at the earliest stages of idea generation, company formation, and market execution, especially those associated with regional startup development organizations, such as seed accelerators, incubators and university tech transfer offices. Seed investments typically range from $50,000 to $500,000, and Series A investments range from $1 million to $2 million. Total commitment averages $4 million to $5 million over the life of a company.

News: The firm’s primary offices are in Houston, but it operates a secondary location in the Techstars Austin office at 412 Congress Ave.

Notable investments: BlackLocusShareThisGameSalad, Phurnace Software (precursor to Datical)

 

Growth stage

Funds under management: $109 million

Focus: Seed and series A investments between $250,000 and $4 million in Texas, with occasional later stage activity. Live Oak aims to be the largest and most active investor in each of its portfolio companies, with a target total investment of $5 million to $7 million in each.

News: First portfolio company to exit was StackEngine in December, when it was acquired by Oracle (NYSE: ORCL).

Notable investments: InfocyteInforcePROOJO LabsRxWiki

 

Funds under management: $200 million

Focus: Enterprise IT solutions for major business problems, medical devices and any opportunity with the potential to define (or redefine) a business category. S3’s portfolio companies are spread around the Southwest and concentrated in Texas.

Notable investments: Datical, Favor, Phunware

 

Later stage investments

Focus: Teams and entrepreneurs in Austin tech, with initial investments ranging from $200,000 to $2 million.

News: Silverton recently led a $10 million funding round for TurnKey, a short-term vacation rental service betting on long-term opportunity in Austin despite current regulations restricting the sharing economy for STRs.

Notable investments: TrendKiteAceableEquipboardSelf LenderSpareFootThe ZebrauShipWP EngineTurnKey

 

Funds under management: The firm doesn’t disclose the size of its fund on its site, but does state that its principals have invested more than $700 million of equity capital over the last 10 years. It’s likely that includes a fair amount of activity from their days at Austin Ventures.

Focus: Launched in 2013 by two of Austin Ventures’ growth equity investors, Phil Siegel and David Lack, Tritium targets buyouts of growth companies in the lower middle market with between $2 million and $15 million in EBITDA in the sectors of web, IT, supply chain and logistics and financial and business services.

News: Tritium recently announced a platform for acquiring companies in fintech with Max Narro, who led Worldpay through its IPO and acquisition of SecureNet Payment Systems. Narro will guide the new platform as a CEO partner.

Notable investments: HomeAwayRetailMeNotNewgistics

 

Recently launched funds

Focus: Seed to growth-stage companies in IT software, health tech and cyber security

News: Digitech announced their first investment this week, but didn’t report the amount. Digitech’s website describes a pipeline containing “three potential deals.”

Notable investments: Just one so far: SmartHome Hero.

 

Funds under management: Currently seeking $50 million to start

Focus: Disruptive companies in big markets

 

Social enterprise funds and groups

southwest angel network austin vc

Funds under management: Approximately 20 members invest individually, led by founder and executive director Bob Bridge. 

Focus: Nurturing and mentoring for-profit startups with missions to make the world a better place.

Notable investments: Too soon to say. SWAN held its first investor presentation meeting in February.

News: Besides a few preliminary announcements, we haven’t heard much out of this group yet. We’re staying tuned, though.

 

Funds under management: Ethnically diverse member angels invest individually

Focus: Startups founded or led by ethnically diverse and female entrepreneurs

Info: If you think your company is what E3 is looking for, it’s easy to apply for investment through E3’s site.

 

Funds under management: Undisclosed

Focus: Businesses and nonprofits with social impact missions. Notley doesn’t have a specific issue, sector or geographic target.

Once you find a fit and are ready to make your pitch, consider what VCs are looking for in your pitch. SWAN director Bob Bridge also offers some valuable advice on market validation here, as do our friends at UT Austin’s McCombs School of Business in this article.

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