Peterson Ventures has closed on a total of $140 million for its fourth fund as well as its first opportunity fund, which gives it the chance to continue investing in its best portfolio companies as they scale.
The firm, based in Salt Lake City and San Francisco, has a unique profile for its seed investment practice. Its focus is on Utah-based companies—a region where SaaS businesses predominate—and companies that come out of the Stanford Graduate School of Business, where firm founder Joel Peterson has been a consulting professor for more than 30 years.
Peterson Ventures made early investments in direct-to-consumer brands including Allbirds, Bonobos and Cotopaxi. Its strategy evolved as it saw opportunities from its direct-to-consumer investments, either in products enabling those businesses or in other verticals that could go direct.
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The firm has now raised more across these two new funds than all three prior funds.
Digital commerce to SaaS
“The second we saw the power of the direct-to-consumer model in retail, we knew there were going to be opportunities in financial services and health care services,” according to Capell, who joined the firm in 2010 before it raised its first external fund. “Mobile devices have given consumers access like they haven’t had before social media.”
Stern, who joined as a partner three years ago before the firm announced its third fund in 2020, added that “there’s a lot of yin and yang” in the firm’s strategy. She also teaches a class in entrepreneurship at Stanford Graduate School of Business.
“The e-commerce practice on the digital commerce side gave birth to the e-commerce enablement practice,” she said.
Stern was the founder of Weddington Way, one of Peterson Ventures’ portfolio companies. She joined the firm as a partner after working on the executive team at The Gap, which had acquired her startup.
“You’ll see density in our portfolio in health care, future of work and e-commerce enablement,” she said.
The firm’s portfolio companies in key sectors include:
Around 40% of its current portfolio is Utah-based, 40% is in the Bay Area, and 20% is across the rest of the U.S.
Pre-revenue and pre-product
Capell credits Stern with bringing a lot of “founder empathy into our team,” which founders need as “growth is very rarely linear.”
Working with companies that are pre-revenue and even before they release a product is something the firm is comfortable doing. “We’re willing to jump in with founders and be all in with them,” said Capell.
Peterson Ventures invests at pre-seed and seed, and likes to lead or co-lead. Its first check is up to $2.5 million. With this new fund, the firm will invest in around 25 new portfolio companies.
Raising its first opportunity fund
Peterson Ventures is now a decade old, with a growing portfolio of companies raising funding at Series B or later.
Like many early-stage investors, the firm would like to continue to invest and hold on to its equity stake in its portfolio, but such investments can take too much capital from the core fund.
With that in mind, the firm has raised its first opportunity fund, which gives it the chance to continue investing in successful portfolio companies from Series B onwards. The opportunity fund essentially allows investors to get additional exposure in the best companies they have invested in and lets new investors in the fund get access to deals that predate the opportunity fund.
On the last two years
On the record-breaking venture market of the last couple of years, Capell said: “We’ve seen companies raise more quickly, more often, and raise more money,” a trend that has benefited the firm’s portfolio companies. “It’s incumbent on us to work with our portfolio companies and make sure we’re not spending that money in a way that puts the companies in a difficult position,” he said.
Peterson team photo courtesy of Peterson Ventures.
Illustration: Dom Guzman
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