Former Battery Ventures VC Dhaliwal Launches New IT Fund
A longtime Boston venture capitalist is striking out on his own, with a new fund that aims to capitalize on big changes in the IT industry and early stage private investing.
Sunil Dhaliwal, formerly of Battery Ventures, is formally unveiling Amplify Partners. The new fund has raised more than $16 million from about 25 investors, with plans to grow to $40 million, according to an SEC filing.
Amplify Partners also has invested in seven companies already, including AppNeta, Continuuity, Datadog, Fastly, and Wibidata. Dhaliwal says the new fund will aim to make eight to 10 deals each year, from the seed stage up to Series A investments.
Amplify Partners will have a presence on both coasts—it’s based in Dhaliwal’s hometown of Cambridge, with principal Farah Giga working in Palo Alto, CA.
The firm will focus on startups that take on huge corporations selling IT infrastructure software with new, more flexible services that are better adapted to the commoditized, customizable nature of modern IT.
Dhaliwal calls it “Infrastructure 2.0”—yep, there’s even a catchphrase—and sees a big opportunity to take on names like IBM, Cisco, EMC, Oracle, and Dell.
“Those guys are a trillion dollars or more in market cap,” he says. “And the funny thing is that most of that market cap comes from franchises that were developed and matured in the ‘80s and ‘90s, and they really haven’t been touched competitively since then.”
It’s a big change for an investor who spent his whole career inside a big venture firm with sprawling interests. Dhaliwal joined Battery Ventures in 1998 as a 22-year-old associate, cutting his teeth by unwinding the carnage of the dot-com crash. “I spent a lot of my early years as a young guy working out sideways investments, and figuring out which ones are successful and which ones fail,” he says.
That grew into a pretty successful career, with notable investment wins in companies like Splunk, Netezza, and CipherTrust, and recognition on the 2011 Forbes “Midas List” of top tech investors.
With Amplify Partners, Dhaliwal says he’s capitalizing on a trend that will see the venture world increasingly splitting into firms of two different sizes.
On the one hand are big, diversified mega-funds that often bundle services and support with their investment checks, and can cover bets up and down the range of startup growth. On the other are smaller, early stage-focused, specialist firms that dig deeply into one sector.
Firms stuck in the middle probably won’t make it—something we saw with the recent news that Bellevue, WA-based Ignition Partners was dramatically scaling back to a smaller, enterprise software-focused fund with just three partners.
If Amplify is taking on the role of smaller specialist, Battery is definitely the big dog.
Battery, which has offices in Waltham, MA, Menlo Park, CA, and Herzeliya, Israel, closed its last fund at a whopping $750 million in early 2010.
Battery lists active investments in nearly 100 companies across a half-dozen tech sectors, including software-as-a-service (Avalara), social media (Backplane), e-commerce (HotelTonight and Wayfair), and IT infrastructure software (Opscode). The firm is now raising its tenth venture fund, reported by Dow Jones to be $650 million.
Dhaliwal says limited partners saw the same thing happening—and were enthusiastic about betting on a new infrastructure-focused small fund like Amplify Partners.
“As I talked to a lot of investors, they said, ‘This was what venture capital was like.’ It was guys who went out and focused on a market and focused on turning small amounts of money into bigger amounts of money, taking the right set of risks,” Dhaliwal says.
There are similar generational forces shaking the IT industry. Aside from the technological changes shaking up the way that big clusters of servers are put together and operated—a seismic change on its own—Dhaliwal says today’s IT pros don’t want to deal with outdated software interfaces and big-dollar, long-term contracts sold by a tech giant.
Instead, they’re looking for hardcore IT software to have the same try-it-first business models and easy-to-use features so common on the Web today.
If there’s in the neighborhood of $1 trillion in market capitalization for the big boys today, “I’m pretty sure the startups are going to capture at least a couple hundred billion dollars of that value,” Dhaliwal says.