Brian and Lisa Sugar, the founders of digital publishing company PopSugar, have raised $33 million for their second venture fund, Sugar Capital. The new fund will invest in the future of commerce, focusing on the picks and shovels of retail. Sugar Capital plans to grow a portfolio of tech and retail startups. The Sugars are also launching a new boutique investment bank called Avid Capital Advisors, aimed at assisting mostly consumer brands and software developers to sell their businesses. The startup ecosystem could see a flood of merger and acquisition deals as capital becomes scarce. Investors are warning of a coming mass extinction event where a large number of startups will shut down. The new investment bank, Avid Capital Advisors, will work with Sugar Capital’s portfolio and companies outside of it. The bank got initial funding from the four partners of Sugar Capital, including Will Hawthorne, who will serve as CEO of Avid.
Sugar Capital’s first fund put about two-thirds of its capital into software companies and a third into consumer brands. However, with its second fund, Sugar Capital will lean more into software and do fewer consumer bets. The firm’s portfolio makeup is part of its alpha. Consumer brands can become customers of its software companies, creating a strategic feedback loop. We’re almost like an embedded product manager with all these consumer brands, Sugar said, and we can seek out and match amazing software companies.
Before raising a fund, Sugar found a sweet spot investing in software for online retailers. As a scout in Sequoia Capital’s program, he backed Everlane, a socially conscious apparel startup, and Afterpay, a service that allows shoppers to buy now and pay later. In 2019, the Sugars sold their media empire to Ben Lerer’s Group Nine Media for a reported $300 million.
This time, the firm has slightly tweaked its strategy. Sugar Capital set out to raise $75 million for its second fund and reduced the target size last summer. The stock market pullback has limited more partners investing in emerging managers in favor of backing established ones. They’re slowing down the pace of investments to stretch their funds. Those who are fundraising are lowering their target fund size.
With Avid Capital Advisors, the Sugars are hoping to assist mostly consumer brands and software developers as they pursue a merger with a larger business or an acquisition. The new boutique investment bank will work with portfolio companies as well as companies outside of it. The startup ecosystem could see a wave of merger and acquisition deals as capital becomes scarce.
