Mercury Fund, an early-stage venture firm, has successfully closed its fifth fund, securing a total of $160 million in capital commitments. This latest fund marks the largest in the firm’s history, cementing their position as a significant player in the software-as-a-service (SaaS) startup landscape.
Key Takeaway
Mercury Fund’s successful closure of its largest fund to date reflects its position as a key player in the SaaS startup space. By focusing on underserved regions and vertical SaaS opportunities, the firm has established a unique investment strategy. Despite the challenges of fundraising, the firm’s operational focus and capital efficiency resonated with LPs, allowing them to secure significant capital commitments. Moving forward, Mercury Fund aims to continue supporting and driving the growth of innovative SaaS startups.
Investing Beyond the Coasts
Mercury Fund adopts a unique investment strategy, focusing on founders who are building transformative SaaS and data platforms in smaller technology markets outside of the traditional coastal tech hubs. By targeting regions with less established startup ecosystems, the fund seeks to fill the gaps in resources and support, nurturing and growing promising startups in these areas.
Blair Garrou, co-founder and managing director of Mercury Fund, emphasizes the firm’s commitment to these regions, stating, “Our model recognizes the untapped potential and opportunities for growth in middle America and other underserved areas. We aim to provide the necessary resources and expertise to empower our portfolio companies and drive rapid growth.”
Shifting Focus: From B2B to Vertical SaaS
Over the years, Mercury Fund has witnessed a significant shift in SaaS opportunities. Initially, the focus was primarily on business-to-business (B2B) industrial SaaS, catering to industries such as automotive, food and beverage, and energy. However, the landscape has evolved, and entrepreneurs are now capitalizing on vertical SaaS and consumer-centric experiences.
This shift is evident in Mercury Fund’s recent investments, such as Otto, a Houston-based patient engagement and fintech platform for doctors, and RepeatMD, a patient engagement and fintech platform based in the same region. By investing in companies that prioritize the consumer experience, Mercury Fund aims to leverage the growing demand for innovative SaaS solutions in various sectors.
Raising Capital in Challenging Times
Despite the unique challenges of being a “middle America” fund, Mercury Fund managed to navigate the fundraising landscape successfully. The firm’s fourth fund, which performed exceptionally well, saw over 10 exits in 2021, garnering high satisfaction from limited partners (LPs).
Blair Garrou attributes the firm’s ability to raise capital during difficult times to their operational focus and capital efficiency. As more companies embraced hybrid work models and sought talent and investments beyond traditional tech hubs, Mercury Fund’s approach became increasingly appealing to institutional investors.
Future Outlook
With the closing of its fifth fund, Mercury Fund aims to continue investing for the next two to three years. Garrou expects to make between 18 and 20 investments overall. The firm has already made notable investments, including Polco, an engagement polling platform for governments, MSPbots, an AI-driven process automation platform, and Brassica, a financial infrastructure technology company.
