Reach Capital closes $265 million Fund V to back AI-focused startups

Reach Capital announced Tuesday the close of a $265 million Fund V. The thesis of the 11-year-old, San Francisco firm is to back founders building AI applications that can “expand human potential,” Tony Wan, head of platform at Reach Capital, told TechCrunch. In practice, he added, that means looking at founders building across three areas: learning, health, and work.

“We believe AI should serve human flourishing, not replace it,” Wan said. The firm’s previous investments include Replit, ClassDojo, and Coral Care.

The new fund will write checks of $1 million to $10 million, spanning pre-seed through Series A, into roughly 50 companies over the next three years. So far, no companies have been backed through Fund V.

Limited partners include Capricorn Investment Group, the Los Angeles Fire and Police Pensions, the LEGO Foundation, and College Board. Speaking to TechCrunch, general partner Jomayra Herrera said fundraising went smoothly and that the team was able to raise the new fund in less than six months.

“The vast majority of our LPs doubled down, and we brought on a few new marquee LPs,” Herrera said. “We attribute this to LP interest in sector-focused boutique funds that focus on conviction-based investments.”

Reach Capital’s new fund is noteworthy given the barbell shape the broader fundraising market has taken in recent years, with capital flowing overwhelmingly to giant, brand-name funds on one end and to sharply focused specialists on the other, with generalist firms in the middle struggling to get LPs’ attention.

Analysis by PitchBook and the National Venture Capital Association found that established firms captured more than 90% of the roughly $62 billion raised across U.S. VC funds through May of this year, leaving a smaller pool of first-time and mid-sized managers to compete for whatever’s left. Reach’s thesis, with over a decade of edtech and impact-investing, fits the mold of the kind of specialist fund LPs have remained open to funding.

The outfit previously raised $215 million for Fund IV in 2023 and $165 million for Fund III in 2021.