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Seed Stage Investors Raise $450M for New Fund

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(Gerd Altmann, Pixabay)

5 Oct. 2021. A venture capital company specializing in financing start-up enterprises at their earliest stages says it raised $450 million for its third venture fund. Crunchbase News today reported the announcement from NFX, a company in San Francisco and Herzlia, Israel that invests across various technology sectors.

NFX — short for Network Effects — aims to fund technology start-ups in pre-seed and seed stages, as well as provide guidance and a supportive network for new businesses. The company says it invests only in those early stages, aiming to be the first investor for tech start-ups. In addition, NFX says its partners are all former company founders, so they understand the pressures faced by start-up entrepreneurs.

The company invests in start-ups developing a range of new technologies, particularly those extend to and affect networks outside their own initial circles. NFX says these network effects account for 70 percent of value creation in technology. And while NFX says it funds businesses across industries, it focuses particularly on sectors with network effects, such crypto technologies, marketplaces, games, financial technologies, and property technologies. Initial investments usually range from $500,000 to $5 million.

Platform technologies and intersection of tech and bio

NFX also considers what it calls tech-bio a priority investment target. Omri Amirav-Drory, a new NFX general partner, tells Crunchbase News, tech-bio covers therapies and diagnostics in the biomedical field, but also food and agriculture, chemicals, new materials, and energy. Amirav-Drory says NFX is particularly interested in “platform technologies and the intersection of tech and bio.”

Crunchbase says NFX has more than 190 portfolio companies. One of NFX’s success stories is Mammoth Biosciences, where NFX provided seed funding and now is in its fourth venture round with a market valuation of over $1 billion, one of 25 portfolio companies with so-called unicorn status. Mammoth is developing diagnostics with the gene-editing technique Crispr, but using a more compact and precise editing enzyme. Science & Enterprise reported on Mammoth Biosciences’s second venture round in January 2020, where NFX took part.

At $450 million, NFX’s Fund 3 is its largest venture fund so far, eclipsing its previous funds of $150 million in 2017 and $275 million in 2019 respectively. NFX says Fund 3 is the largest fund dedicated exclusively to seed and pre-seed stages. The company says it plans to invest in 70 or more start-ups, with about half of the fund reserved for follow-on investments. The recent addition of Amirav-Drory as general partner suggests more investments in bio-related start-ups.

NFX says it provides more than funding for tech start-ups. The company formed its NFX Guild that offers training in business and financial skills such as recruiting, company culture, corporate communications, fund raising, and board management. In addition, NFX provides free software for start-ups that the company says is used by hundred of thousands.

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