406 Ventures, a Boston-based venture firm that invests in enterprise-focused startups in healthcare, data and AI, and cybersecurity, has closed its fifth fund with $265 million in capital commitments.
The company is partnering with Liam Donahue, founder of Boston venture firm Arcadia Partners, and two others, including Maria Cirino, co-founder of managed security services firm Gardent, and former Razorfish CFO Larry Begley. Founded by partners.
The new fund is supported by a group of new and existing limited partners including university endowments, foundations, pension plans and strategic investors. Including the new fund, the 18-year-old firm has raised more than $1.4 billion across five core funds and three opportunity funds.
.406 Ventures Investment Team: Standing, from left, Graham Brooks, Greg Drakkon, Liam Donoghue, Payal Agrawal Divakaran, Kathryn Taylor Reddy, and Kevin Wang. Kneeling, from left, Austin Kuhn and Rebecca Redfield. Missing from the photo: Tripp Hofer. Image credits: .406 Ventures
It's been a while since TechCrunch caught up with the company. When I spoke with Donahue recently, he said .406 Ventures' focus hasn't changed much in that time. The company continues to invest in three industries, leveraging Boston's technology ecosystem, but also investing nationally.
But unlike some of the firm's previous funds, Donahue is seeing more founders return for new investments.
“We wanted to be the kind of partner where founders come back to us thinking about what's next,” Donahue told TechCrunch. “In Funds 1 and 2, we had some repeat founders. In our recent funds, we are excited to see so many great repeat partners returning, with a third of our fourth fund We are a repeat founder and we expect the same with our fifth fund.”
Over 20 years, the firm has assembled a portfolio of 87 companies, many of which have exited or gone public. Most recently, in 2021, his company included Iora Health, which was acquired by OneMedical and is now part of Amazon Health. Behavioral health company AbleTo is part of Optum Health. Meanwhile, Carbon Black and CloudHealth Technologies are part of VMware, and cybersecurity insurance company Corvus was acquired by Travelers in 2023.
.406 Ventures has already invested in four companies from the new fund, including Portrait Analytics, which develops a generative AI platform for investment research and paper writing. Donahue said the new fund plans to invest in more than 20 companies.
When considering startups in three areas: healthcare, data and AI, and cybersecurity, the company considers many factors, including infrastructure plans, especially now that AI is becoming ubiquitous. He also serves on his Executive Council of over 100 executives from Fortune 500 companies.
“We ask ourselves, 'What new technologies will we need to protect in the future that will enhance or change the threat factors?'” Donahue said. “We're always looking three to five years ahead. We're looking ahead and predicting where the vulnerabilities are and who's building that protection.”