Meritech Raises $800 Million for Investment Fund

(Bloomberg) -- Meritech Capital Partners LP, the Palo Alto, California, based venture capital firm that invested in Datadog Inc. and Salesforce.com before they went public, has raised $800 million for its seventh fund.

The firm, which got its start in 1999 prior to the 2001 dot-com bust, said it is poised to invest in both boom times and down times. The recent pandemic, however, was the first time the group had to raise its funds via Zoom Video Communications Inc. calls.

Meritech was able to secure investors who wanted to reinvest based on the firm's recent track record which includes initial public offerings like Datadog, which is now a $21 billion company, and Coupa Software Inc., which has a nearly $15 billion market value. Meritech also had invested in Facebook Inc. when it was still private.

Meritech's median time from investment to acquisition or IPO is 3.5 years, said Meritech Co-founder Paul Madera, but it will often hold onto the stock after a company goes public. Meritech currently has board seats at video game company Roblox Corp. and financial software business Carta Inc.

Yet some limited partners in its funds have expressed concern about high valuations for private companies and how it affects growth-stage investing. Plus, investors like SoftBank Group Corp.'s Vision Fund have inflated the value of some startups.

“They are anxious that the current economic cycle has gone on as long as it has,” Madera said.

Madera said that Meritech tries to take a cautious approach and aims not to pay too high of a price for startup shares. It typically leads rounds for the companies it invests in and writes checks ranging from $10 million to $100 million. Its most recent fund was $630 million in 2018.

The firm is planning to invest the fund in the enterprise software, consumer and health-care sectors.

The current economic climate has shifted the startup categories that are performing well right now, said Alex Clayton, a general partner who recently joined the firm. He said the travel industry has been hit hard but that e-commerce companies are performing well.