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Greylock Partners Increases Latest Fund to $1 Billion After Groupon Stake

Greylock Partners, the venture firm with stakes in Facebook Inc., LinkedIn Corp. and Groupon Inc., boosted the size of its latest fund by 74 percent to $1 billion to increase investments in more mature technology startups.

Greylock added $425 million to its 13th fund, which initially closed in November 2009, the Menlo Park, California- based firm said today in a statement. The capital will be used to fund Web companies that create products for consumers and corporations.

After missing out on the most successful Internet companies in the 1990s, Greylock has emerged as a leader since backing LinkedIn in 2004 and Facebook in 2006. Greylock is also an investor in online radio company Pandora Media Inc. This year it bought a stake in Groupon at a $4.75 billion valuation, people familiar with the matter have said. By adding to its cash pile, Greylock can compete for more big deals while continuing to fund early stage startups, said David Sze, a partner at the firm.

“We see the opportunity in some very large-scale, winner- circle companies to put in larger amounts of money than a seed or early-stage fund would have traditionally done,” said Sze, who led investments in LinkedIn and Facebook. “We tend to only see in those investments a handful of other firms like us.”

Founded in 1965 by Bill Elfers and Dan Gregory, Greylock was based on the East Coast until moving its headquarters to Silicon Valley from Boston in 2009. That year, the firm announced the closing of its 13th fund and hired LinkedIn founder Reid Hoffman as a partner.

Discovery Fund

In September, Greylock announced the Discovery Fund, led by Hoffman, which makes investments of $25,000 to $500,000. Greylock committed $20 million from its most recent fund for the strategy. Out of Fund 13, Greylock has made 36 investments, including 20 discovery deals, 15 “core” stakes and one growth investment, which was in daily deal site Groupon, the company said.

While Greylock is raising money, the venture industry is contracting. Fundraising declined last year for the fourth straight year, dropping 25 percent to $12.3 billion, according to the National Venture Capital Association. Funding has tumbled by more than half since 2005 as a dearth of initial public offerings hurt returns at venture capital firms.

“The average fund is having a very hard time raising significant funds and is either doing a fund similar to its last or often less,” Sze said. “We’ve not seen that in our case to be the situation. Our limited partners have been enthusiastic about expanding the opportunity.”

LinkedIn, the biggest professional-networking site, and Pandora, the top Internet radio company, have filed to go public in the past five weeks. Greylock is also an investor in Zipcar Inc., the car-sharing company that filed for an IPO in June.

To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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