Sep 3, 2020 - Economy & Business

Xfund raises $120 million for third fund

Illustration of money on an 'X'.

Illustration: Aïda Amer/Axios

Xfund, a seed-stage investment firm focused on university research-based startups, tells Axios that it raised $120 million for its third fund.

Why it matters: This illustrates how the pandemic hasn't really slowed down venture capital fundraising or deal-making, even for a firm focused on sparsely-populated university campuses.

Details: Xfund sources around 40% of its deal flow from Harvard, with which it has a non-financial affiliation, where most undergrads are fully remote and most grad students are either remote or have limited in-person (i.e., "hybrid") contact.

  • "The pandemic has obviously altered the university landscape, but social networks are proving to be efficient at connecting people," says Harry Lewis, a Harvard computer science professor whose students have included Bill Gates and Mark Zuckerberg.
  • Lewis adds that there seems to be even more entrepreneurial collaboration, in some cases, because students have fewer social and extracurricular activities.

Landscape: Seed rounds, which is where Xfund is focused, did fall sharply in the first half of 2020, but much of the slowdown was concentrated in the initial shutdown months of March and April. Angel deal totals remained fairly stable, as did overall venture funding.

  • Anecdotally, some seed-stage investors tell me deals are coming together faster than ever before.
  • One high-profile investor worried, albeit anonymously, that some VCs are using the pandemic as an excuse to shirk due diligence, allowing a single Zoom call to suffice.

Flashback: Yes, this is the same Xfund whose co-founders had a nasty falling out several years back.

The bottom line: Private markets have an earned reputation for following the public markets, which are on a bull run divorced from the real economy.

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