Interplay, a New York-based venture capital firm, closed on its third fund with $45 million in capital commitments.
The firm, focused on investments at the Series A stage, deploys capital into software, including B2B marketplace and vertical software. The new fund is a continuation of the firm’s prior two early-stage funds. We previously covered Interplay in 2022 when it was raising a separate vehicle.
Within the marketplace industry, Interplay sees companies digitizing areas that had not yet entered that stage simply because the economics previously did not make sense, Mark Peter Davis, Interplay founder and managing partner, told TechCrunch.
“The overarching trend is we see a major shift towards specialization, happening particularly over the last decade. New companies are increasingly competing with legacy horizontal platforms by providing specialization to be more tailored and specific to particular industries,” Davis said. “We’ve had a lot of success investing around this shift, and that’s the underlying thesis of this vintage.”
For its first fund, Interplay had what Davis called “an angel vintage,” before securing outside limited partners for the second fund. What’s different with Fund III is that it’s institutional funds, with backing from fund of funds, family offices and founders within Interplay’s portfolio.
Davis called out a few ways that Interplay stands out: The first is that limited partners and founders get the same team of general partners making investment decisions every fund vintage, including Davis, Kevin Tung and Mike Rogers, who have been investing together for over eight years. The firm’s investment committee has now made over 50 deals. The second is its outsized value proposition relative to its check size. And the third is the studio which enables Interplay to incubate and start companies. To Davis, this expands its reach and creates deal flow.
Image Credits: Interplay
The new fund gives Interplay $150 million in assets under management. Davis expects to invest in 20 companies with the fund, injecting $1 million to $2 million per check, with some held back for follow-on deals. The firm has already deployed 40% of the fund so far. It most recently invested in two construction tech companies, OnSiteIQ and Roofr.
Meanwhile, fundraising itself, for both companies and VC firms, was tested this year.
“It was a hard market to raise in,” Davis said. “We’re really proud of the outcome we had despite the market, and I would say it’s a testament to the extremely hard work that the team has been putting into now for a decade-plus.”
Getting to a Series A was challenging as of late, and Davis agrees that this particular stage is affected by the market shift. However, Interplay sees a number of good companies with improving key performance indicators that are raising money “at reasonable valuations.”
Higher valuations during the investment boom continues to keep Interplay disciplined about where it deploys its capital. Davis noted that the firm “ended up passing on a lot of opportunities that reflected over-excitement in the market.”
“This is a very attractive market to be investing into because company valuations have come back down to what we think is reasonable,” Davis said. “In some cases, they’ve overcorrected. That’s also going to have its own problems for entrepreneurs, and we don’t like that, but when they’re healthy and they’re fair, we think they set the company up for continued success.”
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