The trend in raising capital from enterprise capitalists in 2024 is already quite clear: large, established VC firms proceed to raise capital from limited partners, while smaller, latest funds are finding it harder to raise it.
However, Industry Ventures’ latest fundraising should bring some excellent news for aspiring managers.
On Tuesday, the 24-year-old firm announced it had raised $900 million in an early-stage hybrid fund to invest in emerging managers and directly support growth-stage firms with their managers. The fund can even buy secondary stakes in emerging managers from other limited partners.
This is Industry Ventures’ seventh hybrid fund, larger than its predecessor by greater than 50% predecessor, $575 million vehicle raised in 2021.
The $900 million fund can be split into three parts: backing VC funds (40%), directly investing in promising Series B startups from their existing partnerships (40%), and acquiring stakes in emerging investment firms from other LPs looking to exit their investments (20%).
It’s a common misconception that it’s hard for start-up managers to get funding lately, but Roland Reynolds, senior managing director at Industry Ventures, says that’s not the case with the funds his firm backs.
“We have seen the vast majority of our managers realize their funds,” he said. “It may take them a quarter or two longer, but most [raising] larger size of funds.”
Part of the industry’s mystery could also be that not all the enterprise capitalists the firm backs fit the standard definition of a first-time manager.
While Industry Ventures’ latest relationships tend to be firms in fund I through fund III, it should proceed to invest in managers as they mature so long as their fund sizes are $250 million or less and they focus on seed and Series A startups, Reynolds said. Those managers include firms that have been in business for greater than a decade, including IA Ventures and Altos Ventures.
Reynolds said that in addition to supporting more experienced smaller managers, it is a good time to invest in latest funds being began by experienced investors who are leaving large firms.
In terms of direct investments, Reynolds said the firm is looking to back the best Series B firms raised through its management relationships. Some of the firm’s recent deals include online banking and money management platform Relay and robotics company Cobot. Industry Ventures’ checks invested directly in firms range from $2 million to $12 million.
Industry Ventures was founded in 2000 by Hans Swildens. The firm is best referred to as a VC investor in secondary equity. The latest hybrid fund brings Industry Ventures’ total assets to over $8 billion.