Mercury Fund, a leading early-stage venture capital company that focuses on making investments outside of traditional coastal tech hubs, revealed that Mercury Fund V (“Fund V” or the “Fund”) has successfully closed with $160 million in capital commitments.
The Fund, Mercury’s largest to date, received more than its $150 million target in investments. Organisations such as university endowments, foundations, and family offices, many of which are located in the central U.S. region where Mercury invests, provided substantial support to Fund V from among current investors and new limited partners, Mercury Fund’s co-founder and managing director Blair Garrou revealed.
Venture capital firms have been making a lot of funding commitment announcements this month. This month has seen a number of new fund announcements, with Mercury Fund joining several companies like Mythos Ventures, Fuse, Connect Ventures, and Unconventional Ventures.
The company, which has been functioning for over a decade, was once known as DFJ Mercury. When Draper Fisher Jurvetson reorganised its entities in 2013, the Mercury Fund was formed. Mercury Fund’s current portfolio of over 50 firms has a combined enterprise value of over $9 billion.
According to Garrou, the Houston-based Mercury Fund normally raises funds every three to four years to allow for capital deployment.
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Mercury Fund SaaS strategy
The company’s model involves financing founders in emerging digital areas outside the coasts who are developing revolutionary software as a service (SaaS) and data platforms. In certain areas, entrepreneurs lack access to the same kinds of resources and startup environments, unlike their coastal counterparts.
Over five years ago, business-to-business in terms of industrial SaaS was a bigger focus, according to Garrou, who discussed the potential for SaaS in those regions. Industries, including automotive, food production, and energy generation
The contemporary consumer experience is driven by entrepreneurs and vertical SaaS. For instance, Garrou realised this about Otto and another new fund investment, RepeatMD. Houston-based RepeatMD is a patient engagement and fintech platform that helps doctors sell items that aren’t covered by insurance.
“You’re starting to see these clusters of activity of really successful companies picking up the SaaS playbook and pushing that forward,” Garrou explained. “Back in fund three, we were almost entirely B2B. That’s now expanded into B2B, B2C and data platforms for fund five.”
Therefore, Mercury has developed an investment strategy with an emphasis on operations to provide these means, allowing portfolio firms to expand more quickly.
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The progress recorded so far
In 2021, Mercury Fund was in the process of raising funds for its fifth fund while simultaneously deploying capital from its fourth fund, which, according to Garrou, “was our best performing fund today.” He also mentioned that during that year, the firm’s portfolio had more than ten exits, which pleased the limited partners.
With the firm’s concept having reached full maturity by this point, the fundraising environment was “pretty robust,” as Garrou put it. When funding ceased in 2022, Mercury’s LPs remained with them through Garrou’s efforts to restore conversation, and some even increased their stake.
Mercury, which had been helping its companies become more capital-efficient before the recession hit, became very appealing to institutional investors, according to Garrou.
“Being a’middle America’ fund, it’s always challenging raising capital counterparts, but our model is just different,” Garrou said. “During COVID is when we saw hybrid work become the norm, and companies could hire talent from anywhere and raise capital from anywhere. That really sat well with our fund being very operationally-focused.”
So far, Mercury’s fifth fund has generated seven investments, including RepeatMD. Garrou anticipates a total of 18–20 investments. Additionally, there is Brassica, based in Houston and Cheyenne, Wyoming, which is a financial infrastructure technology company developing enterprise solutions for alternative assets; MSPbots, based in Chicago, which is an AI-driven process automation platform for small and medium-sized managed service providers; and Polco, based in Wisconsin, which is a community engagement polling platform for local and state governments.
“We expect to do another two to three years of investing throughout this fund,” Garrou said. “Then our hope is that we’ll have another great liquidity period in 2025 like we had in 2021. If so, we’d love to raise again some time after that.”
