Based in San Francisco Industry ventures announced on Tuesday that it has raised $900 million for a fund that may invest in emerging executives and early-stage technology firms.
The firm describes the entity as a “hybrid fund” because it should make commitments to enterprise capital and seed investors, provide backing to individual startups and buy shares in early-stage funds from existing shareholders.
Although Industry Ventures is best referred to as a secondary investor, it has been pursuing this hybrid strategy since 2009. During that point, the Managing Director Roland Reynoldshas already seen its market cycles for aspiring managers looking for latest funds.
He noted that the current climate is significantly different from what it was a few years ago.
“It’s a much more difficult fundraising environment,” Reynolds said. “Getting a flat or slightly larger fund size is a big win.”
Artificial intelligence steps into motion
But while enterprise capital is more limited, Reynolds said he’s optimistic that people who do manage to shut funds will see higher-than-average returns. That’s partly on account of the rise of AI-based business models, although Industry Ventures is quite lively across a number of technology sectors.
Recent investments include robotics and enterprise software. For example, in April, Industry Ventures participated in a $100 million Series B Collaborative Roboticsdeveloper of labor robots. The company also led a $50 million Series B round Coalescing Automationwhich develops data management software.
Going forward, the firm plans to allocate about 40% of the latest fund to emerging managers of early-stage funds, which generally raise $250 million or less. Another 40% will go toward direct investments in startups, typically around Series B.
The remaining 20% of the capital might be used to purchase stakes in early-stage funds from institutional investors, corresponding to foundations and family offices, that are looking for liquidity or are seeking to exit the asset class. Industry Ventures typically buys stakes in enterprise and seed funds that began investing three to 5 years ago, with the expectation that it should likely take many more years to attain significant exits.
With its latest fundraising, the firm now has greater than $8 billion in committed capital under management. Of that, $2.3 billion is earmarked for early-stage hybrid funds that focus on U.S. firms and managers.