The famous early-stage venture capital company Playground Global raised $410 million in financial commitments for its Fund III, which will invest in early-stage deep-tech and scientific startups. The new fund brings Playground’s total assets under management to more than $1.2 billion.
Before becoming a venture investor, co-founder and general partner Peter Barrett worked as an engineer (specifically, a video game developer). He still programs every day and is credited with providing Elon Musk with his first job.
Barrett has surrounded himself with similarly tech-savvy general partners, including Jory Bell, Matt Hershenson, Bruce Leak, and Laurie Yoler, all of whom have extensive scientific and operational backgrounds.
They are drawn to firms developing the next generation of technologies in computers, automation, infrastructure, logistics, decarbonization, and engineered biology.
Fund III will concentrate on seed and Series A firms, with initial investments ranging from $1 million to $20 million, comparable to the $500 million Fund II raised in 2017.
Barrett told Eltrys that Playground “believes there are only a few transformative companies created each year.” MosaicML, purchased by Databricks in June for $1.3 billion, and Velo3D, a firm that helps Elon Musk print the Raptor engines that propel Starship, which went public in 2021, are two of its portfolio exits.
Barrett responded via email to Eltrys’s questions on how the fundraising landscape has evolved since its previous fund raise, lessons gained when investing in deep tech, and what it looks for in a firm.
The text below has been modified for length and clarity.
The last time Playground collected money was in 2017. What was the fundraising climate like this time?
PB: The macro-environment has been difficult for everyone, but when we talked with investors from across the globe, they told us they want to avoid fads and trends and instead concentrate on businesses and sectors where genuine, long-term value is being built. Companies that are long-lasting and defendable.
The new fund and the fundraises of many of our firms have shown that investors, particularly in weak markets, are flocking to quality, and there has never been a better opportunity to invest in exceptional companies.
We had strong backing from current investors and took advantage of the chance to bring in additional investors. We expanded our LP base for Fund III to include endowments, foundations, and single and multifamily offices.
What distinguishes Playground’s services for startups?
We are an early-stage venture capital business that acts as a real partner to our portfolio firms from the start. When you talk to our entrepreneurs, you’ll discover that they see us as co-founders as well as investors. We have a distinct edge in that we can underwrite and retire technical risk, and we can use the roadmaps we’ve built to identify best-in-class developing technologies.
We also do not invest in competitive firms, so the portfolio is really collaborative. The creators of Fund I and Fund II have introduced us to several new portfolio companies. In addition to platform services, our 70,000-square-foot studio is home to several of our own portfolio firms as well as other non-competitive deep-tech startups.
Tell me about your transition from consumer to deep technology. What prompted that decision?
Our team was purpose-built when we launched Playground to assist in the development of both consumer technology and deep tech firms. It was evident from the start that our superpower was underwriting technical risk rather than reading the tea leaves of market risk. We’ve seized an unfair share of the world’s most disruptive firms by concentrating on deep tech and investing in the roadmaps that drive our investment selections.
What have you discovered by delving into deep tech?
We’ve been investing in deep tech firms since Playground’s inception, with PsiQuantum being one of our very first. We’ve learned that nothing is impossible until it isn’t and that a thinking capital combined with talented, persistent individuals can propel society ahead.
What deep tech fields excite you, and which do you avoid investing in?
Our first-principles underwriting in chemistry, biology, and computing enables us to invest in game-changing firms in next-generation compute, AI/automation, infrastructure, engineering biology, and decarbonization.
There is no contradiction between investing in important technology and earning high profits. We are attracted to firms that can create substantial technological moats and enter industries where they are unquestionably the category leader. We stick to our plans rather than riding the zeitgeist.
What qualities do you want in a startup?
We’re searching for testable theories that address pressing issues and have realistic routes to success. We’re not searching for a prospective solution to a problem; we’re looking for the answer that brings the right idea, the right people, and the right moment together.
How many Fund III investments have you made so far?
Playground has already made many Fund III investments, including d-Matrix, Ideon Technologies, Amber Bio, Infinimmune, and Atomic AI, as well as several stealth portfolio businesses.
We think that our stealth firms are in a unique position to transform green metal production and provide the groundwork for next-generation semiconductor fabrication.
d-Matrix, for which Playground led the Series A, has already raised its next round, a $110 million Series B investment, which was disclosed in September. The business is developing the next generation of AI HW using an in-memory computing architecture focused on inference in the data center.
Given your prior association with Elon Musk, what do you think of his management of X, Tesla, and other companies?
We all wish Elon spent more time electrifying the earth and launching rockets into space.
