(Bloomberg) -- Harpoon Ventures, whose investors include Andreessen Horowitz veteran Peter Levine and former Olympic swimmer Michael Phelps, has raised a $125 million fund to back early-stage startups.

The fund — the firm’s fourth — is expected to close Friday, according to Harpoon founder Larsen Jensen. It will be slightly larger than the previous fund, which closed in 2021 at $122.5 million.

The five-year-old venture capital firm invests in so-called dual use technologies — commercial products that can also be sold to federal agencies. It has backed about four dozen startups so far, including clean tech provider Solugen Inc. and satellite company Astranis Space Technologies Corp., which recently secured deals with the US Department of Defense and was valued at $1.6 billion.

“We’re focused on the next generation of outcomes,” Jensen said, adding that his firm writes early checks and holds those shares in perpetuity — rather than selling for a quick return when private valuations rise.

“We want to build an organization that lasts for decades.” said Jensen, who — like Phelps — is a former Olympic swimmer. He also served as a Navy SEAL before working at venture firms Andreessen Horowitz and Lightspeed Venture Partners. Those two firms financed Harpoon Ventures’ early days as a startup accelerator and currently operate “at an arm’s distance” from Harpoon, Jensen said. 

Still, Andreessen’s Levine invested personally in the firm’s newest fund. In an email, Levine said Harpoon’s deep knowledge of Defense Department operations was a major selling point.

“They’re experts at mapping the government landscape, understanding your business, helping find product market fit, procurement, and the ebbs and flows of the government purchasing cycle,” Levine said.

It’s been a challenging year to raise money, especially with the market for initial public offerings remaining sluggish. US-based venture firms had raised just $42.7 billion by the end of the third quarter, putting 2023 on pace for the lowest full-year total since 2017, according to data provider PitchBook.

Jensen said some limited partners, including Phelps, told him they were unwilling to invest in a venture fund under these conditions. Harpoon had initially sought to raise $225 million with the latest fund, according to a filing.

“I think this year it was no secret that it was more difficult than 2021,” Jensen said in an interview on Bloomberg Television Friday. “In 2021 investors and allocators were jumping both feet into the pool,” he said, adding that “the IPO window has been effectively shut since then.” 

Now, it takes longer to raise money. “It is no secret that the opportunity cost has gone up,” he said, adding that Harpoon is “fortunate to have durable capital partners that have worked with us.”

--With assistance from Paayal Zaveri.

(Updates last two paragraphs with quotes from Bloomberg TV and adds detail on Phelps in the ninth paragraph.)

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