Union Square Ventures has announced a new $165 million Opportunity Fund to help the firm pursue late-stage investments at higher valuations. Union Square Ventures was founded in 2003 to invest in the “applications layer of the Web,” leading to investments in companies like Foursquare and Zynga when they were much smaller companies than they are today. The Opportunity Fund will let Union Square keep investing in partner firms and their spin-offs.
The impetus for the Opportunity Fund seems to be Twitter’s $200 million round of investment in December, where Union Square Ventures did not participate. While Union Square Ventures did not announce a reason for its lack of participation, it’s widely speculated that Union Square couldn’t afford Twitter’s new $3.7 billion valuation. Historically, Union Square Ventures focused on investing in early-stage start-ups and keeping the size of individual funds small.
“Since 2004, the opportunity to invest in networks has evolved. In 2004 the entire market capitalization of the social media sector was probably less than $100M. Today a single company in that sector is valued at over $50B. The amount of venture capital focused on the sector has exploded. Networks that did not exist in 2004 now consume a huge chunk of users’ time and attention, making the launch of new networks more challenging. The opportunity to invest in networks has changed, and once again we are changing with it,” wrote Union Square Ventures partner Fred Wilson, at the firm’s official blog.
Wilson says the Opportunity Fund is roughly the same size as Union Square Ventures’s 2008 core fund. The firm intends to keep managing its core funds more traditionally and to avoid moving to a focus on late-stage investment. Instead, the Opportunity Fund is meant to give Union Square Ventures “additional capacity” when the firm needs it. Wilson says the Opportunity Fund’s investors are largely the same individuals that invest in Union Square Ventures’s core funds.