Foundation Capital Secures $600M Fund, Fueling Innovation in Solana and Cerebras Ventures
Foundation Capital, a prominent venture capital firm, has made significant strides in the investment landscape, particularly in the realm of seed-stage investing. After a challenging period that saw its fund size shrink from $750 million in 2008 to $282 million in 2013, the firm has recently announced a remarkable recovery with the launch of its latest $600 million flagship fund. This new fund is 20% larger than its predecessor, which closed at $500 million three years ago.
Foundation Capital’s Focus on Seed-Stage Investing
Foundation Capital attributes its resurgence to its unwavering commitment to seed-stage investing. General partner Steve Vassallo emphasized this focus in a recent interview with TechCrunch, stating, “Most firms that have been around for 30 years have typically gone multi-stage, multi-geography, multi-strategy. We instead have stayed very focused on the early stage.”
Leading the Way in Early-Stage Investments
Foundation Capital takes pride in being the first institutional investor in over 70% of its portfolio companies. Vassallo elaborated on their investment philosophy, stating, “We look for what I call ‘$0 billion’ markets in enterprise, AI, fintech, and crypto. These are markets that don’t even exist until founders will them into being.”
- AI Chip Market: Foundation Capital was instrumental in the launch of Cerebras in 2016, a company that has since grown into a $4.25 billion entity.
- Blockchain Innovation: The firm was also the first institutional investor in the blockchain platform Solana.
Vassallo likened their search for founders to the concept of identifying “pre-criminals” in the movie Minority Report, humorously stating, “We sometimes joke about identifying pre-founders before they’ve even left their last job.”
Successful Exits and Cash Returns
Foundation Capital’s proactive investment strategy has resulted in successful exits that have significantly boosted cash returns for its limited partners (LPs). The firm has returned approximately $1.4 billion to its LPs over the past three years, which is more than three times the amount it requested during that period. Key exits include:
- Sale of fraud detection company EvolutionIQ to CCC for $730 million.
- Acquisition of cybersecurity startup Venafi by CyberArk for $1.5 billion.
Adapting to a Changing Market
Despite its commitment to early-stage investments, Foundation Capital recognizes the need for a larger fund. This necessity arises from the increasing size of seed and Series A deals, as the firm aims to maintain ownership stakes of 15% to 20% in each company upon initial investment.
However, the firm is undergoing some changes. Charles Moldow, a veteran investor who contributed nearly 20 years to Foundation Capital and supported companies like LendingClub, Rappi, and Kiavi, retired last year. This transition has left the firm with four general partners.
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