San Francisco’s SignalFire, a venture capital firm renowned for its data-driven approach, has successfully raised $1 billion for its fifth and largest fund, which is set to focus on applied artificial intelligence companies. This significant capital increase elevates the firm’s total assets under management to $3 billion.

Insights from the Founder

In a recent discussion, founder Chris Farmer shared insights into the firm’s evolving investment thesis after 12 years of operation. He stated, “It’s a fantastic validation that we have enough proof points in the portfolio and enough scale with companies that we’ve gotten into very early, that are quite large at this point.”

Strengthening Partnerships

The new fund attracted a diverse group of limited partner investors, including:

• Large U.S. public pension funds
• An Asian sovereign wealth fund
• A major global banking institution
• A prominent insurance provider

Additionally, existing partners include endowments, foundations, family offices, and fund-of-funds.

Data-Driven Decision Making

At the heart of SignalFire’s operations is its proprietary machine-learning platform, Beacon AI, which Farmer describes as “the fabric that stitches the entire firm together.” This platform supports critical functions across sourcing, selection, portfolio management, and value addition.

Beacon AI analyzes 80 million entities and 650 million individuals, enabling the firm to identify anomalies in company performance, benchmark effectiveness, and enhance portfolio success through talent acquisition and lead generation.

Investment Strategy

The firm intends to deploy the new funding over 2.5 years, making approximately:

• 100 pre-seed investments ranging from $100,000 to $1 million
• 60 seed investments from $1 million to $5 million
• Additional Series A and B investments between $5 million and $30 million

SignalFire’s Executive in Residence (XIR) program will allocate between $15 million and $30 million, focusing on promising startups, accounting for around 30 investments overall.

Highlighting Previous Successes

SignalFire has a robust track record in applied AI investments, with notable companies including:

• EvenUp – Legal technology for personal injury cases
• Stampli – Accounts payable optimization
• Horizon3.ai – Cybersecurity testing solutions
• Grow Therapy – Therapy scheduling platform
• Monarch Money – Personal finance management
• Whop – Marketplace for digital goods

The firm’s most significant exit thus far is the acquisition of Frame.io by Adobe in 2021 for nearly $1.3 billion.