This week, we caught up with DFJ Growth cofounder Randy Glein to understand how closely related or not the two remain, how the firm is feeling about the shaky late-stage market, and whether his team of five general partners is ready to raise their own, third, fund from investors. Our chat has been edited for length.
Quickly, what are you looking for when you’re writing checks? How mature does a company need to be?
We pick up where venture funds leave off. We’re invest in the scaling phase of businesses, so we’re looking for that inflection point where the company has found its product market fit and customers who are paying for its products. We come in when companies are generating low tens of millions of dollars in annual bookings, growing more than 100 percent a year, and playing in a market that’s big enough to support a large company. That can be $1 billion to $100 billion dollars, depending on the market opportunity.
Can you invest in a company regardless of whether or not DFJ’s venture team has made an earlier investment in it?
Many companies we’ve co-invested in with DFJ and not followed. It just depends on the stage of the business. Also, as we’ve raised bigger funds – our first fund closed with $290 million in 2007 and our second closed with $470 million in 2013 — there’s been less overlap. I’d say 25 to 30 percent of our first fund was invested in companies backed by DFJ; in the second fund, it’s less than 10 percent. Our charter is to invest in the most exciting growth-stage companies on the planet, and to go anywhere to find them.
Do you share the same investors?
Again, there was more overlap in first fund; with the second fund, less than half the capital is coming from [DFJ’s same investors]. Some LPs want to invest in venture. Some want to invest in growth stage companies because they have a different risk tolerance profile or need to take a different size bite. Some want both and see us as sister funds.
Are you raising another fund in 2016?