Antonio Rodriguez, who joined Matrix in 2005 after a company he founded was sold to Hewlett-Packard, talked with us last week about Matrix's biggest fund in 20 years, an $800 million vehicle that the firm closed in June.
It is a lot of capital for the firm, which, like Benchmark, has been consistent over the years about maintaining comparatively smaller funds. During the dot-com era, Matrix raised a $1 billion fund and returned half of it to its investors.
Rodriguez told us about the new fund. We spoke with him about how Matrix works with Matrix Partners China and Matrix Partners India. Most of the time, they operate independently. We asked Rodriguez about web3 because software infrastructure is a major focus for the firm. Matrix doesn't put a lot of stock in it at the moment. Excerpts from our chat are included.
The last three funds were each $450 million. You were disciplined about the size of your body. What's the reason?
With our current fund that we just finished investing, every single deal we did was either at concept or seed or pre-seed or Series A, so it really wasn't about stage drift. In recent years, due to new entrants and existing players moving back into the A, you went from having to write a $10 million check to, in some cases,$15 million or $20 million, and we wanted to make sure we could keep doing those entry checks. It's still very much for our categories.
The Series A stage deals are not getting any smaller.
It's not yet. A Series A round size can be as high as $20 million. We like more technical projects, whether it is software or hardware, or a company at the intersection of both, and they need more money.
Some of the later stage outfits seem to be getting smaller. Do you think it's easier to maintain your pro rata without throwing your arms?
It will get easier as it gets easier. The best exits from the last three funds don't lend themselves well to what I would call the spreadsheet jockeys. In a lot of cases, you had to step up, as opposed to expecting that a Tiger or Coatue would come in and fund the company in a day or two. It will be equally necessary to maintain our pro rata in this environment.
What percentage of ownership do you want?
That is close to correct. It has ranged between 20% and 25% in the past. We were tilted to 18% to 21% over the last year. The long-term structural target for us is 20% to 25%.
Are you talking about companies that are in the early stages of development?
A number of our companies have begun at one of our offices with an investor and anentrepreneur working on an idea. 5% to 10% of any given fund would probably be dedicated to this.
The graphic design business is worth $26 billion. Do you have a large stake in that company?
It was out of market when we did it. Three people are on that table. We invested the largest check we could find in the seed round, and we own in the single digits. A large multistage investor has accumulated a position across many rounds after an investor who was in the pre-seed round.
The market was open, why didn't it go public? Is it true that it was founded in 2012?
When it comes to IPOs, Canva will be a great one, in good times or bad. Something that will help the business is what usually causes companies to leave. Sometimes it is as tactical as the company is growing quickly but consuming a lot of cash and having access to the public market allows you to access cash quicker. Combining that with an open window is a win-WIN for everyone.
When a company goes public, what benefits do you have?
It will happen. Millions of people pay to use the platform. Think is a company that has done a good job with the internet. It is effective in making money like a B2BSaaS company.
Matrix's big theme this year has been applied artificial intelligence as it affects everything from software infrastructure to networking in the data center. I haven't heard you talk about it.
The advantage of having nine partners is that people can keep me honest, but my own view is that it is a mirage. Most of the stuff that has made a lot of people a lot of money over the last few years is based on a trusted distributed database.
You are not hearing me mention it because we are not doubling and tripling down. Half of the money was not raised to put into web3 applications. We have a couple of investments, but we have followed founders from payments into web3 or from proptech into web3 and less because we are excited about the prospect of starting a web3 practice here.
Matrix Partners has a team in both San Francisco and Boston. A person is at center.
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