Paul Capital’s third venture FoF hits $620m

San Francisco-based venture fund of funds Paul Capital Partners has closed on $620 million for its latest venture vehicle, Paul Capital Top Tier Investments III, LP.

The new fund, at $620 million, came in $120 million above its target, and represents a roughly 30 percent jump over its previous venture fund of funds. Similar to past funds, Paul Capital Top Tier investments III will make investments in primary and secondary interests of what it identifies as upper-quartile venture funds.

The Paul Capital closing comes as the venture space continues to adjust post bubble. While VC success stories such as Google and Skype have put venture back on the map, based on the smaller size of the funds VC groups are raising, the industry still seems to be resizing to the true opportunity.

Sigma Partners just capped its most recent fund at $400 million, $200 million off from of its predecessor; Mayfield recently closed on $375 million, a far cry from the $1 billion its previous fund raised; Even Menlo Ventures pulled back a bit, taking in $1.2 billion for its most recent vehicle, versus the $1.5 billion the firm attracted for Fund IX.

Despite the industry-wide downsizing, one group that hasn’t applied the brakes is Paul Capital.

It’s apparent by the increased fund size that LPs were attracted to the Paul Capital offering. However, the question remains, if the Paul Capital fund is getting larger while new primary VC funds are downsizing, will the firm still be able to gain access into the top tier groups?

What’s more, the secondary market has grown more competitive, and following the shakeout after the tech bubble burst, most legacy venture LPs are die-hard VC investors not necessarily looking to gain liquidity.

Despite these concerns, Paul Capital is not worried about either access to primary funds or finding opportunities in the secondary market.

Regarding the slimming VC fund sizes, one source close to Paul Capital told PEO: “We just got through the most heady period ever in venture capital investing, and there are a lot of funds out there that are right-sizing themselves to address the new market… It’s a challenge for anybody to continually get access, but [Paul Capital] generally does.”

The source adds that Paul Capital has been able to maintain its favoured status among GPs throughout the years, especially as FOIA requests have created a gulf between VC groups and the public pensions forced to disclose previously shrouded IRR data.

Meanwhile, in terms of squeeze facing secondary players in the venture market, the source noted, “I suspect the secondaries allocation in [Fund III] could reach around 25 percent, which is a lower number than the previous fund. In the past there were quite a few distressed sellers and there was more of that urgent deal flow. But the new fund will be opportunistic.”

In addition to its Top Tier Funds platform, Paul Capital also manages funds covering private equity secondaries and healthcare royalty and revenue interests.

The source wouldn’t comment on former investments, although recent reports indicate the firm has made commitments to Bay Partners, Avalon Ventures, Shasta Ventures, De Novo Ventures and Granite Ventures in the past.

Limited partners in the new fund are said to include the State of Florida, Ohio Public Employees Retirement System, British Petroleum Pension, British Coal Board and the Canada Pension Plan Investment Board, among others.