Greylock joins the growth equity land-grab

Mar 02, 2011

Venture capital firm Greylock Partners yesterday announced that it has expanded its thirteenth fund to $1 billion, up from the $575 million it originally raised in late 2009. Much of the new capital will be used for growth capital investments of between $25 million and $200 million -- like the bi-coastal firm’s recent participation in Groupon’s mammoth round -- as part of what is being termed the Greylock Growth fund.

Some quick notes, based on a conversation with Greylock partner David Sze, who is leading the growth equity effort:

  • The Growth Growth “fund” is actually a carve-out of the larger $1 billion fund, and does not have a specific allocation. Kind of like what Greylock did last year with its Reid Hoffman-led “Discovery Fund,” which invests between $25k and $250k.
  • In semi-related news, the Discovery Fund no longer has a $20 million allocation, as originally planned. Or any specific allocation for that matter. The idea is to not put pressure on any one strategy.
  • All of the new commitments came from existing LPs.
  • Sze says that the firm has not altered the fund’s return expectations, even though growth-stage investing is generally considered lower-risk, lower-reward than early-stage investing.
  • Greylock does not plan to participate in deals where it doesn’t have, at a minimum, board observer rights. With Groupon, for example, Hoffman is a board observer.

It will be interesting to see which model proves best for this growth-stage land-grab: Forming dedicated growth funds (Accel, Kleiner, etc.) or just incorporating growth investing into general funds (Greylock, Andreessen Horowitz, etc.). Or if all of it falls flat on its face, due to skyrocketing valuations...

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