Global alternative investment firm Arcapita’s decision to partner with Parkway Venture Capital was four years in the making.
Parkway, which was looking for someone with deep pockets to help support its push into AI and other capital-intensive frontier tech, had an early conversation in 2021 with Neil Carter, managing director of US private equity for Arcapita, says Parkway co-founder and general partner Gregg Hill, who already knew Carter from previous business dealings.
At that time, Arcapita felt it was too early to invest, but it started looking at Parkway’s portfolio and even met some founders, including Jack Hidary, CEO of SandboxAQ, a developer of advanced quantum and AI technology.
Over the last few years, investment groups that had not yet invested in technology became intrigued with AI and began focusing more on its growing market potential. While Arcapita didn’t know which VC firm to allocate to, “the years of getting to know each other was really helpful because we didn’t come out of the blue,” Hill tells Venture Capital Journal. “They already were familiar with us.”
Arcapita, which is headquartered in Bahrain, recently announced it would be a strategic partner to Parkway, committing to its current fund and being an anchor investor in future vehicles. In addition to having the capacity to bring a lot of capital to deals, Arcapita will serve as “a validator” whose greater degree of due diligence on Parkway can provide comfort to other investors, says Hill.
Parkway’s co-founder and general partner Jesse Coors-Blankenship called the alliance with Arcapita “a defining moment” that will enable Parkway to “scale our global reach and deepen our impact in frontier technology, delivering results that shape industries and redefine possibilities.”
Arcapita declined to comment, but Hill says the firm’s commitment was instrumental in getting Parkway’s $200 million Fund III nearer to a final close, which is expected before this summer. The fund is oversubscribed and its valuation is already 2x before the completion of fundraising, partly because of portfolio company Figure AI’s progress, he notes.
Parkway Fund III began fundraising in March 2023 and held an initial close on $34.6 million from 90 investors as of March 2024, according to regulatory filings (here and here).
Despite being a global institutional investor that has done private equity and real estate transactions valued at more than $32 billion, Arcapita had never allocated to venture capital before Parkway.
Hill expects Arcapita’s allocation to VC to grow incrementally over time, much like its private equity investments have.
“The hope is that we keep executing and they keep getting excited about Parkway and their percentage goes up every single year as we keep offering opportunities,” he says. “But they’re not going to give you $5 billion [on] day one. It’s a stepping stone – each fund – as you move forward.”
Lower volume, higher conviction
There are other reasons for Arcapita’s attraction to Parkway besides the firm’s experience with AI. “They like our strategy of being the largest preferred shareholder in these companies, joining the boards, [and being] lower volume, higher conviction,” Hill says. “I think that makes a lot of sense to them. I don’t think they would back us if we were investing in 100 companies and playing the averages. The great thing about our track record is it’s flawless. We’ve never had a loss and never had a down round. So they decided, ‘If we’re ever going to make a move into venture capital, this is a good time to do it with Parkway.’”
Fund III has invested in five companies so far and will back a maximum of 10. Part of Parkway’s strategy is to spend “a little more time with the companies, leading the rounds, instead of just jumping into the next deal and sliding in on a deal,” says Hill. “It’s a little bit more comprehensive an approach.”
Since the alliance with Arcapita began to solidify, Parkway has co-led a $300 million Series E round for SandboxAQ in October. Last month, Parkway led the latest funding round for humanoid robotics developer Figure AI for an undisclosed amount. A year ago, Parkway led Figure AI’s $625 Series B round, partnering with Microsoft, Nvidia, Evolution VC Partners and Bezos Expeditions, among others, as previously reported by Venture Capital Journal.
Parkway declined to say whether or not Arcapita has made direct investments in either company.
“Landing someone like Arcapita is really difficult for VC firms as they scale. You need the track record, and they have to really buy into what you’re doing, so a lot of VC firms never land a group like this,” Hill notes. If not Arcapita, Parkway would have sought another institutional investor to partner with, but, “We’re just glad they came in now so that we can move faster and raise some bigger funds.”
Parkway plans to launch its fourth fund, which is expected to be considerably larger than Fund III, sometime this year.
“We’ve been operating like a multi-billion fund for years now,” says Hill. “It’s just now [a matter of] raising the actual fund because of the deals we’re doing. Nobody with a $200 million fund is leading [rounds for] SandboxAQ and Figure,” whose capital needs are greater than those of many other tech start-ups. “And [other VCs] only have so much money, and they spread it around and do earlier-stage investing.”
Global alternative investment firm Arcapita’s decision to partner with Parkway Venture Capital was four years in the making.
Parkway, which was looking for someone with deep pockets to help support its push into AI and other capital-intensive frontier tech, had an early conversation in 2021 with Neil Carter, managing director of US private equity for Arcapita, says Parkway co-founder and general partner Gregg Hill, who already knew Carter from previous business dealings.
At that time, Arcapita felt it was too early to invest, but it started looking at Parkway’s portfolio and even met some founders, including Jack Hidary, CEO of SandboxAQ, a developer of advanced quantum and AI technology.
Over the last few years, investment groups that had not yet invested in technology became intrigued with AI and began focusing more on its growing market potential. While Arcapita didn’t know which VC firm to allocate to, “the years of getting to know each other was really helpful because we didn’t come out of the blue,” Hill tells Venture Capital Journal. “They already were familiar with us.”
Arcapita, which is headquartered in Bahrain, recently announced it would be a strategic partner to Parkway, committing to its current fund and being an anchor investor in future vehicles. In addition to having the capacity to bring a lot of capital to deals, Arcapita will serve as “a validator” whose greater degree of due diligence on Parkway can provide comfort to other investors, says Hill.
Parkway’s co-founder and general partner Jesse Coors-Blankenship called the alliance with Arcapita “a defining moment” that will enable Parkway to “scale our global reach and deepen our impact in frontier technology, delivering results that shape industries and redefine possibilities.”
Arcapita declined to comment, but Hill says the firm’s commitment was instrumental in getting Parkway’s $200 million Fund III nearer to a final close, which is expected before this summer. The fund is oversubscribed and its valuation is already 2x before the completion of fundraising, partly because of portfolio company Figure AI’s progress, he notes.
Parkway Fund III began fundraising in March 2023 and held an initial close on $34.6 million from 90 investors as of March 2024, according to regulatory filings (here and here).
Despite being a global institutional investor that has done private equity and real estate transactions valued at more than $32 billion, Arcapita had never allocated to venture capital before Parkway.
Hill expects Arcapita’s allocation to VC to grow incrementally over time, much like its private equity investments have.
“The hope is that we keep executing and they keep getting excited about Parkway and their percentage goes up every single year as we keep offering opportunities,” he says. “But they’re not going to give you $5 billion [on] day one. It’s a stepping stone – each fund – as you move forward.”
Lower volume, higher conviction
There are other reasons for Arcapita’s attraction to Parkway besides the firm’s experience with AI. “They like our strategy of being the largest preferred shareholder in these companies, joining the boards, [and being] lower volume, higher conviction,” Hill says. “I think that makes a lot of sense to them. I don’t think they would back us if we were investing in 100 companies and playing the averages. The great thing about our track record is it’s flawless. We’ve never had a loss and never had a down round. So they decided, ‘If we’re ever going to make a move into venture capital, this is a good time to do it with Parkway.’”
Fund III has invested in five companies so far and will back a maximum of 10. Part of Parkway’s strategy is to spend “a little more time with the companies, leading the rounds, instead of just jumping into the next deal and sliding in on a deal,” says Hill. “It’s a little bit more comprehensive an approach.”
Since the alliance with Arcapita began to solidify, Parkway has co-led a $300 million Series E round for SandboxAQ in October. Last month, Parkway led the latest funding round for humanoid robotics developer Figure AI for an undisclosed amount. A year ago, Parkway led Figure AI’s $625 Series B round, partnering with Microsoft, Nvidia, Evolution VC Partners and Bezos Expeditions, among others, as previously reported by Venture Capital Journal.
Parkway declined to say whether or not Arcapita has made direct investments in either company.
“Landing someone like Arcapita is really difficult for VC firms as they scale. You need the track record, and they have to really buy into what you’re doing, so a lot of VC firms never land a group like this,” Hill notes. If not Arcapita, Parkway would have sought another institutional investor to partner with, but, “We’re just glad they came in now so that we can move faster and raise some bigger funds.”
Parkway plans to launch its fourth fund, which is expected to be considerably larger than Fund III, sometime this year.
“We’ve been operating like a multi-billion fund for years now,” says Hill. “It’s just now [a matter of] raising the actual fund because of the deals we’re doing. Nobody with a $200 million fund is leading [rounds for] SandboxAQ and Figure,” whose capital needs are greater than those of many other tech start-ups. “And [other VCs] only have so much money, and they spread it around and do earlier-stage investing.”
