Lightspeed Venture Partners raised $4.2 billion in fresh funds just as the coronavirus began putting startups out of business. Here's how the 20-year old VC firm is adjusting to investing amid the downturn.

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Lightspeed Venture Partners raised $4.2 billion in fresh funds just as the coronavirus began putting startups out of business. Here's how the 20-year old VC firm is adjusting to investing amid the downturn.
Lightspeed Venture Partners' Ravi Mhatre

Lightspeed Venture Partners

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Ravi Mhatre, partner at Lightspeed Venture Partners

  • Lightspeed Venture Partners raised $4.2 billion across three funds to fund early and growth-stage startups, the VC firm announced Tuesday.
  • The announcement comes at a time when the coronavirus outbreak has been wreaking havoc on the startup ecosystem, forcing furloughs, layoffs and business shutdowns.
  • "In an environment like the one we're seeing now, the velocity at which investment decisions are getting made has slowed for sure. And we are trying to be really deliberate," in investing, Lightspeed partner Ravi Mhatre told Business Insider.
  • Lightspeed is the third VC firm to announce it raised billions in April, after Index Ventures and Insight Partners.
  • Visit Business Insider's homepage for more stories.

Menlo Park VC giant Lightspeed Venture Partners has raised $4.2 billion distributed across three funds, even amidst the coronavirus downturn, it announced Tuesday.

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The billions break down into both early-stage and later-stage investments. Lightspeed's early-stage fund has a fresh $890 million, while $1.83 billion is assigned to a growth fund for companies ready to scale up, and another $1.5 billion is allocated to an opportunity fund for doubling down on "breakout" companies around the world.

Lightspeed's announcement comes as the coronavirus pandemic has laid waste to the US startup ecosystem - startups are being forced to cut costs, furlough and lay off workers, and even shutter their businesses entirely. Meanwhile, VCs are telling startups to brace themselves and plan for the worst as a 10-year bull-run market comes to an end.

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Although Lightspeed's new funds signal that the VC firm is open for business, it is still adjusting its strategy to a slower-paced investment environment, according to Lightspeed partner Ravi Mhatre.

"Our strategy is always to try to find these founders who have disruptive and transformational ideas and visions," Mhatre said. "In an environment like the one we're seeing now, the velocity at which investment decisions are getting made has slowed for sure. And we are trying to be really deliberate, to say if we are going to invest in a company, we really believe their commitment to building something that can be durable and can succeed [in the downturn]."

As for Lightspeed's existing portfolio companies, Mhatre said that the VC firm is advising each one to examine its business model, and formulate strategies to adjust to a new environment. And in the event a startup needs to shift to a new model, Mhatre confirmed that Lightspeed had carved out the capital to be able to support it.

"If companies need to shift from one operating model to a new one, there's capital required to help with that transition and we've absolutely planned out our funds to be able to support our companies," Mhatre added.

Fundraising amid the pandemic

The VC firm began talks to raise new funds with its limited partners back in January, before the coronavirus outbreak began to wreak havoc on the economy. But even as Lightspeed's talks with investors proceeded amid a sharp downturn, Mhatre says, investors were reassured by the VC firm's long-view strategy.

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"Our LPs generally have been with us a long time, over multiple fund cycles, and even as people were kind of having questions about what the current environment was, that didn't really materially affect the discussions we were having because I think they take a long view of the kinds of investments Lightspeed makes," Mhatre said.

And Lightspeed's track record with investors has been particularly impressive: 19 of its 21 IPOs have happened in the past decade, including Snap. Forbes reported that Lightspeed has returned $1.5 billion to its limited partners on an annual basis, for the past three years.

Fundraising and deal flow are expected to dry up in the upcoming months, according to an April report from the Natural Venture Capital Association. But Lightspeed's latest round adds to a growing pile of evidence that mega-funds may not be as vulnerable to the downturn as smaller fund managers. Index Ventures announced it raised $2 billion in funds and Insight Partners raised a whopping $9 billion in new funds.

For the time being, Lightspeed appears optimistic about its strengthened ability to support startups and entrepreneurs amid the downturn.

"We think now is actually going to be a great time to double down on people who take the long view and who want to grow and build durable, independent businesses," Mhatre added. "Ultimately if we're taking a long view, this was a time when I think, you know, the vintage of companies that are born could ultimately be incredibly successful."

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