3 investors from Microsoft’s corporate VC arm M12 are striking out on their own with a new AI-focused firm
Last October, Priya Saiprasad got a call that, by now, was familiar: Nagraj Kashyap, her longtime mentor and colleague, wanted to poach her—again. The pair were working together at SoftBank, where Kashyap recruited Saiprasad over a year before from VC firm Mayfield. But their ties went further back: Kashyap and Saiprasad were part of the founding team at Microsoft’s corporate venture fund, M12. And last fall, Kashyap was calling to ask Saiprasad if she wanted to join him in launching a new venture fund to invest in software and AI companies.
“It’s not every day that someone who’s been your mentor for a really long time comes to you and says, ‘Do you want to start something together?’” Saiprasad told me. The option to build something of her own with Kashyap was too tempting to pass up.
Shortly after the October call, the pair also convinced Samir Kumar, who had worked with Kashyap at Qualcomm, and, most recently, M12, to join them. The three are now launching a new venture firm, Touring Capital, to invest in what they describe as software-as-a-service companies powered by AI, focusing on Series B and C stages. They’re currently in the process of raising their first fund.
Though the trio have a lot in common, including their penchants for software, one big thing tied them together: They had all worked at, and left, M12. As I first reported earlier this year, Microsoft’s independent VC fund had been making big changes for over a year before the fund announced a strategy shift in January (Kumar was the last of the group to leave, at the end of 2022). Seven-year-old M12 has maneuvered to become a more strategic corporate VC arm, versus one that was focused principally on financial return—as Kashyap, who was M12’s first global head, had intended. The changes were met with some tough conversations inside the fund, as I reported, which led to a good deal of turnover. And per a report this summer, M12 has been selling stakes in some of its portfolio companies on the secondary market.
Kashyap attributes M12’s strategy changes wholly to the fund’s new leader, Michelle Gonzalez, who was brought on to replace him in 2021. “Every leader has the right to basically change the organization to what they want to do. So I’ll leave it at that,” he told me. When I asked whether their new firm would buy M12 stakes if they were up for sale, Kashyap said they would if they deemed it a good opportunity.
The ex-M12 group is partnering with London-based investment firm Oakley Capital for the new firm. Oakley partner Steven Tredget says they wanted to capitalize on the AI boom within software, but didn’t have the expertise to take advantage of it. He says Oakley decided to team up with Touring, and in return provide them with Oakley’s existing infrastructure and relationships in Europe (and, of course, capital). Oakley is also helping raise the fund alongside the Touring partners, but Tredget says Oakley will be largely hands-off when it comes to investing decisions.
The ex-M12 investors, which will have an equal partnership in the new fund, are targeting $300 million, according to a person with knowledge of the fundraise. A recent filing shows the value of the firm’s assets were about $53 million through the end of August, but Oakley’s Tredget told me that the current total is “approaching halfway” to the target.
Of course, I wonder what the process has been like in such a tough fundraising environment—especially for emerging managers.
“It does not matter what the environment is, raising a first time fund is hard, period,” Kashyap says. The three have existing connections that seem to be helping them so far: They told me that about 25 of the founders they’ve worked with in the past are backing the new fund, as well as family offices and institutional LPs (among the three, they’ve backed companies like Kahoot and Go1). And they’ve already made one investment, the team told me: Pixis, a startup that’s using AI to help customers scale their marketing campaigns, which Kashyap says was also one of their SoftBank deals.
A big part of Touring’s strategy—and the genesis of its name—is to “tour” the world to find companies outside of the Bay Area, says Saiprasad. While the team says they will still invest in San Francisco-based companies (where the firm is headquartered), they’re particularly interested in companies in areas like Europe, India, Israel, and Australia.
The new firm is eyeing software companies that are focusing on, “where can we infuse the new wave of language models and foundation models to make a business process more efficient? Where do we have some unique advantage around data that we can collect that we’re not competing with the tech giants?” says Kumar. Other broad buckets they’re interested in are companies that are building the “copilot for X”—in other words, “humans plus AI assist working together to make a workflow more efficient”; and those providing picks-and-shovels-type software tools, Kumar says.
I do wonder how much of the M12 DNA will be part of this new venture. Indeed, Touring is leaning heavily on connections from deals the ex-M12 team has already made. They say that previous founders they’ve backed will help them find their future founders (as well as, of course, their own venture relationships).
It will be a big change to go from corporate VC to an emerging fund. After all, as Kashyap points out, this time around, “We can’t rely on a 50-year-old brand name.”
Arm prices its IPO: The British chip designer priced its IPO at $51 per share on Wednesday, meaning the company would be valued over $54 billion (as a reminder, the company is selling American depositary shares, or ADSs). The company is expected to start trading today under the ticker “ARM”. A lot of VCs’ hopes are pinned on a successful IPO for the company (and others in the pipeline), as many are eager to see evidence that the IPO market is—actually, successfully—reopening. With Arm’s shares priced at $51, the valuation is below what reports had indicated Arm intended to raise, of up to $70 billion.
See you tomorrow,
Joe Abrams curated the deals section of today’s newsletter.
– Denodo, a Palo Alto, Calif.-based platform for data integration, management, and delivery, raised $336 million in Series B funding from TPG.
– Lyten, a San Jose, Calif.-based manufacturer of materials used in lithium-sulfur batteries for the automotive, aerospace and defense markets, raised $200 million in Series B funding. Prime Movers Lab led the round and was joined by Stellantis, FedEx Corporation, Honeywell, Walbridge Aldinger Company, and others.
– VideoAmp, a Los Angeles and New York City-based adtech company that amasses audience data intended to help companies create more informed and better planned advertising, raised $150 million in Series G funding from Vista Credit Partners.
– UBQ Materials, a Tel Aviv, Israel-based company creating sustainable plastic substitutes from waste, raised $70 million in funding. Eden Global Partners led the round and was joined by TPG Rise Climate, TPG’s Rise Fund, Battery Ventures, and M&G’s Catalyst strategy.
– Kin Insurance, a Chicago, Ill.-based direct-to-consumer home insurance company, raised $33 million in Series D extension funding. QED Investors led the round and was joined by existing investors Geodesic Capital, Allegis Capital, Hudson Structured Capital Management, and Alpha Edison.
– Druid, a Bucharest, Romania-based conversational AI-powered chatbot that relays business information to employees and customers, raised $30 million in Series B funding. TQ Ventures led the round and was joined by Smedvig Capital, Endeavor, Verve Ventures, and existing investors GapMinder, Hoxton Ventures, and Karma Ventures.
– Duckbill, a Boston, Mass.-based company developing an online personal assistant powered by AI and humans, raised $25 million in Series A funding. Forerunner led the round and was joined by General Catalyst, Inspired Capital, Greycroft, G9 Ventures, and Offline Ventures.
– Bold, a Beverly Hills, Calif.-based platform that provides personalized exercise programs for aging users, raised $17 million in Series A funding. Rethink Impact led the round and was joined by Samsung Next and existing investors Andreessen Horowitz Bio + Health, Khosla Ventures, GingerBread Capital, and Primetime Partners.
– Parade, a San Francisco-based platform for booking and managing freight trucks, raised $17 million in pre-Series B funding. I Squared Capital led the round and was joined by existing investors Menlo, Greenhawk Capital, Jones Capital, The House Fund, Operator Stack, and angel investors.
– The Sporting News, a Charlotte, N.C.-based sports publication, raised $15 million in funding. Playtech led the round and was joined by others.
– CO2 AI, a Paris, France-based platform where companies can measure their carbon use and explore ways to reduce it, raised $12 million in seed funding. Unusual Ventures led the round and was joined by Partech.
– Carenostics, a Philadelphia-based startup that has developed an AI platform to identify undiagnosed and undertreated chronic disease patients, raised $5 million in seed funding. M13 led the round and was joined by Greatpoint Ventures, Gaingels, and Kurt Hillzinger.
– Movement Labs, a New York City-based company designing blockchains that are intended to make communication between chains easier, raised $3.4 million in pre-seed funding. Varys Capital, dao5, Blizzard The Avalanche Fund, and Borderless Capital led the round and were joined by Colony, Interop Ventures, Elixir Capital, BENQI, and others.
– Treefera, a London, U.K.-based platform using AI to map forests, track deforestation, and analyze carbon credits, raised $2.2 million in pre-seed funding. Concept Ventures led the round and was joined by Twin Path Ventures, January Ventures, angel investor Greg Lavender, and others.
– Roam, a New York City-based online platform allowing users to purchase a home with an assumable low-rate mortgage included, raised $1.25 million in seed funding. Keith Rabois led the round and was joined by Eric Wu, Ryan Johnson, and Jana Messerschmidt.
– Digital Alpha Advisors acquired a minority stake in Tarana Wireless, a Milpitas, Calif.-based wireless internet provider, for $50 million.
– Arax Investment Partners, backed by RedBird Capital Partners, agreed to acquire Ashton Thomas Private Wealth, a Scottsdale, Ariz.-based financial advisory firm. Financial terms were not disclosed.
– BGB Group, backed by TPG, acquired Kx Advisors, a Washington, D.C.-based consulting firm for pharmaceutical, biotech, and medical technology companies. Financial terms were not disclosed.
– BMS Group, backed by Eurazeo, acquired Smith & Reid Insurance, an Ottawa, Canada-based insurance brokerage firm, and O’Neil Insurance Brokers, a Renfrew, Canada-based insurance broker firm. Financial terms were not disclosed.
– FirstLight Power, backed by Public Sector Pension Investment Board, agreed to acquire Hydromega Services, a Montréal, Canada-based operator of clean power facilities. Financial terms were not disclosed.
– GTCR acquired Foundations Source, a Fairfield, Conn.-based company providing administrative and management tools for philanthropists. Financial terms were not disclosed.
– NoBlue2, backed by FPE Capital, acquired BrightBridge Solutions, a Sharnford, U.K.-based IT consulting services company for fintech and manufacturing companies. Financial terms were not disclosed.
– Praecipio, backed by Periscope Equity, acquired Gurnet Consulting, a Boston, Mass.-based management consulting firm intent on helping streamline companies by using Atlassian software and leadership training programs. Financial terms were not disclosed.
– Kolors acquired Urbvan, a Mexico City-based B2B transportation mobile app, from SWVL for $12 million in cash.
– SecurityBridge acquired Protect4S, a Wageningen, Netherlands-based cybersecurity platform focused on automating data and resource planning protection. Financial terms were not disclosed.
– Anzu Partners, a Washington, D.C.-based venture capital firm, appointed Cathryn Paine to partner. Formerly, she was with Mapbox.
– Data Point Capital, a Boston, Mass.-based venture capital firm, hired Bruce Revzin as chief financial officer and Haley Farnsworth as senior associate. Formerly, Revzin was at Cobepa North America and Farnsworth was at MaC Venture Partners.
Correction, Sept. 14, 2023: The online version of this newsletter has been updated to correct “ADV” to “ADS” for Arm’s shares.