Large investment managers are pouring money into venture firms, but they are increasingly selective.
The latest firms to raise money are DAG Ventures, here in Silicon Valley, and Accel Partners and IDG, for their operations in China.
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DAG Ventures, however, has just finished raising $477 million for its third fund. We’ve nicknamed the SF-Palo Alto firm “Coattail Ventures” for its strategy of investing in companies already backed by the top-tier firms. These firms include Kleiner Perkins, Sequoia Capital, Benchmark, and lately, Accel. DAG makes few exceptions. By piggybacking on the work of those firms, DAG can cherry-pick from among the best deals, so that even if it invests later, and therefore pays a higher price to invest, it can avoid backing the less successful ones that never make it off the ground. It expects to cap the fund at a total of $500 million. DAG plans to add two more investment partners over the next year, partner John Cadeddu tells VentureBeat. The firm saw two of its companies, Matrix Semiconductors and Grouper, sold last year.
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