Venture group to provide $210M for startups

An Austin-based venture capital firm said early Wednesday it would pour $210 million into Texas-based startups, marking its largest investments in early-stage companies.

The leaders of LiveOak Venture Partners originally planned to raise a maximum of $200 million in their Fund III to support promising new companies, but Krishna Srinivasan, one of LiveOak’s cofounders and partners, said investors were so eager to put money into Texas startups that he and his team had to get approval to raise the fund’s cap by 5 percent.

“Our strategy is focused on the white-hot Texas market, which is seeing tremendous growth,” Srinivasan said. “What is strong about Texas is the cross pollination of talent between mainstream industries and tech. There are large market opportunities in industries like healthcare, energy, logistics, etc., all of which are being disrupted by tech.”

Other investors have also taken note.

In the first quarter of this year, venture firms pledged more than $1.3 billion into Texas-based startups, according to the Wall Street Journal and analytics firm PitchBook Data, more than had been raised in each of the three previous quarters. A record $1.5 billion was raised in the first quarter of 2020.

Still, the venture funding raised in California, Massachusetts and New York accounts for 74 percent of all VC funding in the country in 2020, according to a report from a report from PricewaterhouseCoopers and CB Insights. Texas was ranked fourth for the number of deals and investment money raised in 2020, with 267 deals worth a total of

$3.46 billion, but Massachusetts, ranked No. 3, raised nearly $14.2 billion for 505 deals.

And most of the capital raised in Texas has gone to startups based in the Austin area. About 70 percent to 75 percent of LiveOak’s portfolio is based in Austin, for example, while the rest is distributed among the other large population centers in the state.

Venu Shamapant, cofounder and general partner at LiveOak, said that proportion mirrors how investments have played out across the state. However, he said his team has spent a disproportionate amount of time hunting for companies in Houston, Dallas and San Antonio.

“In Fund III we’re going to continue to be very aggressive in terms of boots on the ground to meet new entrepreneurs, and we think this strategy works even more in Houston and Dallas,” he said.

Srinivasan said the market is growing across Texas, and not just in Austin, because the talent available for hire here has begun to come closer to the workforces in places like California and Boston.

“We are seeing a quality of talent like never before and seeing company formation and the quality of company formation better than it ever has been before,” he said. “Those are often the early indicators of a vibrant and exciting venture ecosystem.”