- Fidelity Investments has launched its first dedicated venture capital fund, Venture Capital Fund I.
- The $250 million Fund I targets mid-to-late stage companies in technology, media, and telecommunications sectors.
- The new fund marks a shift from Fidelity’s traditional private market investing, allowing the firm to make direct minority investments and cater to high-net-worth individuals, family offices, and registered investment advisers.
Fidelity Investments recently closed its Venture Capital Fund I LP, or what it is calling Fund I. The $250 million fund– which received support from investors including high net-worth individuals, family offices, and registered investment advisers– held its final closing on September 30.
Fidelity has been investing in private companies for over 15 years, having backed Twilio, Stripe, and even SpaceX. During its decade-and-a-half of investing, Fidelity has deployed over $28 billion across 600 investments in 350 private companies. Historically, the firm has focused on high-growth category disruptors, leveraging its mutual funds to back private companies with notable competitive advantages.
Fidelity Investments Portfolio Manager and Global Head of Private Equity Karin Fronczke emphasized how the launch of the new fund strengthens Fidelity’s already robust track record of investing in private companies. “The success of this fundraise speaks to Fidelity’s legacy investing in private companies. We are grateful for the support from the fund’s limited partners,” she said.
The firm’s introduction of Fund I, however, marks a significant departure from its traditional approach, carving out a more defined venture capital strategy. With Fund I, Fidelity has a dedicated vehicle for direct minority investments and will target mid-to-late stage companies in the technology, media, and telecommunications sectors.
Additionally, the new fund will help Fidelity meet the growing demand from high net-worth individuals, family offices, and registered investment advisers who want more diversification in private market investments. Fidelity’s Fund I is a notable shift towards a specialized venture capital structure that can cater to investors seeking access to high-growth private companies and diversification beyond traditional public markets.
Fund I is already in motion, having invested $31 million in 10 companies spanning industries including aerospace, defense, artificial intelligence, and e-commerce.
Fidelity, which already manages 50 alternative funds, recently launched liquid alternatives ETFs and mutual funds. The firm currently counts $27.8 billion in assets under management in alternatives and $80 billion in alternative investment assets under administration.
This announcement comes at an interesting time for the fintech venture capital funding environment, which is experiencing a notable drought. As Finovate Research Analyst David Penn noted on the blog earlier this week, “According to market intelligence platform Tracxn, funding for U.S.-based tech companies in Q3 of this year fell, both in comparison to the previous quarter as well as when compared to Q3 2023. Tracxn also reported that the number of tech unicorns actually increased this year compared to last year, with 13 new unicorns acknowledged in Q3 2024 compared to just five in Q3 2023.”
However, Fidelity’s optimism in launching a new fund may signal a turning point in the fintech funding landscape. This shift could push more traditional asset managers to create similar venture capital funds, pushing more capital into later-stage fintech firms, a group which has been ignored by investors over the past few years.