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Venture Capital: San Diego's Anzu Partners Raises $200M for its Third Fund
Anzu Partner's Co-Founder and Managing Partner David Michael discusses raising its third fund, the firm's portfolio performance and investing in San Diego.
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Anzu Partners, a venture capital firm, has raised $200 million for its third venture fund, to continue backing startups in clean technology and life sciences industries.
Limited partners in the new fund include new and returning public and private institutions, single and multifamily offices, and accredited investors globally.
The fund is the largest to date, and now has $1 billion assets under management.
I spoke with David Michael — who helped co-found Anzu Partners in 2014 — about fundraising in today’s high interest rate environment, its recent portfolio companies, and its recruiting strategy in San Diego.
“We’ve raised more than our second fund, so we're very happy about that.” said Michael in a phone interview last Thursday. “It's more than $200 million. And that reflects confidence and support from a group of institutional investors both pre-existing and new. There is real interest in the themes that we are pursuing, and have already invested in several companies out of fund III.”
Founded in 2015, Anzu Partners focuses primarily on industrial technologies and life sciences. It has invested in more than 40 industrial and life sciences startups, since inception.
The firm invests “millions of dollars” of non-dilutive funding, whether through government grants or research programs, or is a spinout from a top university.
Anzu has offices in five cities including D.C., Atlanta, Boston, San Diego and Tampa, with more than 50 employees across the U.S., with six based here locally.
Founded in 2015, Anzu Partners is rooted in Washington D.C., and expanded to San Diego, opening an office in La Jolla in 2017.
Managing partner David Michael, who has been at the firm since the very beginning, heads the local office and manages a team of six. Other co-founders partners include Whitney Haring-Smith and David Seldin.
The firm also has presence in markets including Atlanta, Boston, and Tampa with a total of roughly 50 employees. It has invested in more than 40 industrial and life sciences startups across its three venture funds.
San Diego remains a key hub for the firm, given its proximity to top universities such as University of California, San Diego, said Michael.
Compared to other metropolitans like L.A, San Diego remains a key market for the global venture firm specifically in terms of talent coming out from surrounding universities and various accelerator programs such as Connect.
“We think there are a lot of vibrant companies being developed in San Diego and Southern California,” said Michael. “And there is great talent coming out of places like UC San Diego and their MBA programs.”
Fund III will remain focused on early-stage investments, typically writing checks between $3 million and $10 million.
In particular, the firm has five key areas of interest including manufacturing, materials, measurement & monitoring, and modeling — essentially doubling down on investing in highly technical startups, Michael said.
It has already deployed $123 million to 12 companies from Fund III, including three energy-storage startups — AM Batteries (Boston-based), e-Zinc (Canada-based), and South 8 Technologies (San Diego-based).
Anzu Partners is also an active investor in both Solana-based MedCrypt, a cybersecurity software startup and La Jolla-based Xendee, a software startup improving micro-grid energy projects for electric vehicles.
“If you are a software venture firm, you likely won’t be looking at a company like South 8 Technologies,” said Michael. “But, if you understand the technology behind Lithium-ion batteries, and the deep tech capabilities, then you can recognize this will be a high potential company that addresses a large market.”
Hiring Talent from UC San Diego
Now that Anzu Partners has $200 million in fresh capital for future deal-making. The venture firm will continue build out its team locally.
In particular, hiring those with a highly technical background to scout deals and perform due diligence on promising startups.
At the San Diego office, its six-person operation has Jimmy Kan, Evan Kay, Gautham Chandrasekar, Sonal Naik, and Jordan Viernes on its team, all who earned degrees in San Diego and have proven experience in Anzu’s zone of expertise.
“Among our team of six, four of them are UC San Diego graduates. All which have degrees either in engineering, doctorate, or an MBA coming out of the Rady School of Management,” said Michael. “We also regularly hire interns from the university, which we are very proud partners with.”