The trend in venture capital raising in 2024 is pretty clear so far: Large, established VC firms continue to attract capital from limited partners, while smaller, newer funds are finding it harder to raise.
However, Industry Ventures’ latest fundraising should offer good news for emerging executives.
On Tuesday, the 24-year-old firm announced it had raised a $900 million hybrid early-stage fund to invest in emerging managers and directly support growth-stage companies alongside their principals. The fund will also purchase a secondary interest in emerging managers from other limited partners.
This is Industry Ventures’ seventh hybrid fund and is more than 50% larger than predecessor, a $575 million vehicle raised in 2021;.
The $900 million fund will be split three ways: backing VC funds (40%), directly investing in promising Series B startups from their existing partnerships (40%), and acquiring stakes in emerging investable companies from other LPs who want to leave (20%) .
The common lore is that it’s very difficult for emerging managers to raise capital now, but Roland Reynolds, senior managing director at Industry Ventures, says that’s not what he’s seeing with the funds his firm backs.
“We’ve seen the vast majority of our managers complete their money,” he said. “It might take them a quarter or two longer, but most of them are [raising] larger capital sizes’.
Part of the industry secret may be that not all VCs the firm backs fit the standard definition of emerging managers.
While Industry Ventures’ new relationships are typically companies with I to III funds, it will continue to invest in managers as they mature as long as their fund sizes are $250 million or less and are focused on startups and Series A startups, Reynolds said. . These managers include companies that have been around for over a decade, including IA Ventures and Altos Ventures.
In addition to supporting more established small-cap managers, Reynolds said it’s a good time to invest in new funds started by experienced investors who are leaving large companies.
In terms of direct investments, Reynolds said the firm tries to back the best Series B companies that come from its manager relationships. Some of the company’s most recent deals include online banking and money management platform Relay and robotics company Cobot. Industry Ventures checks invested directly in companies range from $2 million to $12 million.
Industry Ventures was founded in 2000 by Hans Swildens. The firm is best known as a secondary VC investor. The latest hybrid fund brings Industry Ventures’ total assets under management to over $8 billion.
