Canva-backer FPV Ventures raises $525m for early-stage startups

FPV Ventures, a venture capital firm co-founded by Wesley Chan and Pegah Ebrahimi, has raised US$525 million for its second investment fund.

This follows the firm’s initial fund of US$450 million, launched three years ago.

Founded in 2022, FPV Ventures focuses on early-stage startups in various industries.

The firm has previously invested in notable companies such as Canva, Flexport, and Guild Education.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Smaller VC funds consistently outperform larger ones, validating FPV’s mid-sized approach

Multiple studies confirm that smaller venture capital funds are delivering significantly better returns than larger ones in the current market environment.

Recent analysis reveals smaller funds (under $350 million) achieve an average internal rate of return of 17.4%, nearly double the 9.7% generated by funds exceeding $750 million 1.

This performance gap is further evidenced by success rates: only 17% of funds over $750 million return more than 2.5x capital to investors, compared to 25% of funds under $350 million 1.

FPV’s $525 million fund size strategically positions them in the mid-cap range ($250M-$1B), potentially capturing the nimbleness of smaller funds while maintaining sufficient capital to support portfolio companies through multiple rounds 2.

Wesley Chan’s observation about frustrations at larger funds aligns with documented challenges these entities face: increased competition for deals, pressure to deploy larger amounts of capital, and difficulty maintaining returns at scale, all factors that have contributed to declining performance metrics since 2022 1.

2️⃣ FPV’s successful fundraise defies severe industry-wide contraction

The venture capital industry experienced a dramatic pullback in 2023, with total U.S. investments dropping to $170.6 billion across 15,766 deals, significantly down from $242.2 billion the previous year 3.

Fundraising conditions were particularly harsh, with only $66.9 billion raised across 474 funds in 2023, marking the lowest fundraising activity since 2017 3.

Multiple factors contributed to this decline: economic uncertainty, high interest rates, difficult exit conditions, and a significant mismatch between investor and entrepreneur valuation expectations 4.