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Lightspeed formed a re-investment team to help the VC prepare for a downturn

July 20, 2022, 12:15 PM UTC

Cheer someone on from the sidelines for long enough, and you might just get too attached.

“Everyone’s baby is beautiful, especially when you’ve been involved in some of these portfolio companies from a seed or Series A,” says Michael Romano, Chief Business Officer of Lightspeed Venture Partners.

That’s the reason why Lightspeed, the Menlo Park, Calif.-based VC that collectively oversees some $18 billion in assets under management across its funds, set up what it calls a “re-investment team” about three years ago. That and the company was anticipating a correction.

This new team, comprised of four people, has a couple of responsibilities: First, to standardize the metrics the firm is using to evaluate all its investments. Second, to challenge every single one of Lightspeed’s investment assumptions.

It’s one interesting thing Lightspeed partners told me they had been up to over the past few years—and likely one of the reasons the firm’s limited partners were willing to throw another $7.1 billion in their direction amid the widespread uncertainty we’re seeing in both the public and private markets. (You can read about some of those other things in my latest feature here)

So what exactly does this look like in practice? The team constructs its own forecasts, crunches its own data, and makes its own customer reference calls—then evaluates whether the firm is paying the right price before the checks are signed. 

Lightspeed says the re-investment team put a damper on several follow-on investments that the firm looked at making last year. 

“Sometimes it’s a great company—and it’s one that we know well—but the price just didn’t make sense,” Romano says. “We spent quite a lot of time last year, and the preceding years really, saying no.” 

Approximately 70% of Lightspeed’s growth investments last year were made in pre-existing portfolio companies—where the investment team knew the founder and felt they had “asymmetric access” to the company’s performance and “long term tailwinds,” Romano says.

Come 2022, those “nos” likely weren’t a bad idea.

You can read my full piece on Lightspeed, including how their funds are performing and what’s next post-Jeremy Liew, here.

Just a reminder… I know you’ve heard me say this, but good journalism takes a lot of time and resources. That’s why Fortune put up a paywall—so that we’re able to dig deep and take a few weeks (or months) to write about the most overpaid CEOs in the Fortune 500, Zillow’s $6 billion home flipping disaster, or the growing number of online trolls. If you like the work we’re doing, please consider an annual subscription. (You can use the code MATHEWS22 for 50% off)

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Sanctuary Wealth, an Indianapolis-based platform for financial advisors, raised $175 million in funding from Kennedy Lewis Investment Management

- CAMP4 Therapeutics, a Cambridge, Mass.-based biotechnology company using RNA to restore protein expression, raised $100 million in Series B funding. Enavate Sciences led the round and was joined by investors including Gaingels, 5AM Ventures, Polaris Partners, Northpond Ventures, Andreessen Horowitz, The Kraft Group, and others. 

- Flip, a Los Angeles-based e-commerce platform, raised $60 million in Series B funding. WestCap led the round and was joined by investors including Mubadala Capital and Streamlined Ventures

- Cassava Technologies, a London-based digital services and infrastructure company to the pan-African region, raised $50 million in funding from C5 Capital

- Crunchbase, a San Francisco-based business information platform, raised $50 million in Series D funding. Alignment Growth led the round and was joined by investors including OMERS Ventures, Mayfield, and Emergence Capital

- X1, a San Francisco-based credit card company, raised $25 million in Series B funding. FPV Ventures led the round and was joined by investors including Craft Ventures, Spark Capital, Harrison Metal, SV Angel, Abstract Ventures, the Chainsmokers, and Global Founders Capital.

- Meow, a San Francisco-based crypto yield, raised $22 million in Series A funding. Tiger Global led the round and was joined by investors including QED and others. 

- KitaBeli, a Jakarta-based social commerce platform, raised $20 million in funding. Glade Brook Capital led the round and was joined by investors including AC Ventures, GoVentures, and InnoVen Capital.

- Intelligent City, a Vancouver-based urban housing design company, raised $17 million in Series A funding. BDC Capital’s Cleantech Practice, Greensoil PropTech Ventures, UIT Growth Equity, Fulmer & Company, and others invested in the round. 

- Healthie, a New York-based infrastructure platform for digital health companies, raised $16 million in Series A funding. Velvet Sea Ventures led the round and was joined by investors including Greymatter Capital, Watershed, Builders VC, and others.  

- Koffie Insurance, a Brooklyn, New York-based insurance company for the trucking and transportation sector, raised $11 million in Series A funding. Anthemis Group led the round and was joined by investors including Lerer Hippeau Ventures, Plug and Play Ventures, CP Overture, Breakout Capital, Two Lanterns Venture Partners, and others. 

- FairPlay, a Los Angeles-based decision-making algorithmic platform, raised $10 million in Series A funding. Nyca Partners led the round and was joined by investors including Cross River Digital Ventures, Third Prime, Fin Capital, TTV, Nevcaut Ventures, Financial Venture Studio, and Jonathan Weiner

- Veremark, a London-based pre-employment screening and career credentials firm, raised $8.5 million in funding. Stage 2 Capital, Samaipata, Triple Point Ventures, ACF Investors, Vulpes, and SOV invested in the round. 

- HiddenLayer, an Austin-based security platform for machine learning models, raised $6 million in seed funding led by Ten Eleven Ventures

- Blustream.io, a Worcester, Mass.-based product experience platform, raised $5.2 million in Series A funding. PBJ Capital and GutBrain Ventures led the round and were joined by investors including York IE and Zenie Group

- Push Security, a London-based SaaS security company, raised $4 million in seed funding led by Decibel Partners

- The Garden, a London and Manchester-based learning platform, raised £3 million ($3.60 million) in seed funding led by Index Ventures

- DRAUP, a London-based digital fashion platform, raised $1.5 million in funding led by Variant Fund.

- Umami, a San Francisco-based open-source web analytics platform, raised $1.5 million in pre-seed funding led by Race Capital

PRIVATE EQUITY

- EnCap Flatrock Midstream invested $200 million in Vecino Energy Partners, a San Antonio-based midstream infrastructure provider for the domestic oil and gas industry.

- Alpine Investors acquired FEV Tutor, a Boston-based K-12 online tutoring platform. Financial terms were not disclosed.

- Arcline Investment Management acquired Mezzo Technologies, a Baton Rouge, La.-based microtube heat exchanger designer and manufacturer. Financial terms were not disclosed. 

- Atlantic Street Capital acquired the assets of CyberGuard Compliance, a Las Vegas-based licensed CPA firm. Financial terms were not disclosed. 

- CGI Manufacturing Holdings, a CORE Industrial Partners portfolio company, acquired Tenere, a Dresser, Wis.-based custom mechanical solutions manufacturer to the information and communication technology, fiber, and renewable energy end markets. Financial terms were not disclosed.

- GreyLion and Vestar Capital Partners recapitalized 360training, an Austin-based online training and continuing education platform for regulated industries. Financial terms were not disclosed. 

- MiddleGround acquired PVI Holdings, a Hanoi, Vietname-based flow control distributor. Financial terms were not disclosed. 

- Munch’s Supply, backed by Genstar Capital, acquired Wholesale Sheet Metal, a Kansas City-based HVAC and sheet metal provider, and Pile Protection Tops, a Kansas City-based building materials provider. Financial terms were not disclosed. 

- Oaktree Capital Management agreed to acquire a majority stake in 17Capital, a London-based private equity lending company. Financial terms were not disclosed.

OTHER

- Informa agreed to acquire Industry Dive, a Washington D.C.-based business news company, for $525 million, according to Axios.  

- Huntress acquired Curricula, an Atlanta-based security awareness training platform. Financial terms were not disclosed. 

FUNDS + FUNDS OF FUNDS

- Fundamental Advisors, a New York-based alternative asset manager, raised $1.43 billion for its fourth fund focused on affordable and workforce housing, renewable energy, senior care, and infrastructure. 

- COI Partners, a Frankfurt and Zurich-based growth investor, raised €300 million ($306.89 million) for a fund focused on growth companies. 

- B Capital, a New York-based investment firm, raised $250 million for an early-stage fund.

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