The trend in venture fundraising for 2024 is becoming quite clear: Large, well-established VC firms continue to attract capital from limited partners, while smaller, newer funds face more challenges in raising money.
However, Industry Ventures’ latest fundraise brings some positive news for emerging managers. On Tuesday, the 24-year-old firm announced it had raised a $900 million early-stage hybrid fund aimed at investing in emerging managers and directly supporting breakout growth-stage companies alongside their managers. The fund will also purchase secondary interests in emerging managers from other limited partners.
This is Industry Ventures’ seventh hybrid fund, and it’s more than 50% larger than its predecessor, a $575 million fund raised in 2021.
The $900 million fund will be allocated in three ways: 40% for backing VC funds, another 40% for direct investments in promising Series B startups from their existing partnerships, and 20% for acquiring stakes in emerging investment firms from other LPs looking to exit.
Despite the common belief that raising funds is very challenging for emerging managers right now, Roland Reynolds, senior managing director at Industry Ventures, has a different perspective based on the funds his firm backs.
“We’ve seen the vast majority of our managers are getting their funds done,” he said. “It might take them a quarter or two longer, but most are raising larger fund sizes.”
Part of Industry Ventures’ success may be due to the fact that not all the VCs the firm backs fit the standard definition of emerging managers. While the firm’s new relationships usually involve firms on their first through third funds, they continue to invest in managers as they mature, as long as their fund sizes are $250 million or less and focused on seed and Series A startups, Reynolds explained. These managers include firms that have been around for over a decade, such as IA Ventures and Altos Ventures.
Reynolds also noted that it’s a good time to invest in new funds started by experienced investors who are leaving large firms.
For direct investments, Reynolds said the firm is looking to back the best Series B companies sourced from its manager relationships. Recent deals include online banking and money management platform Relay and robotics company Cobot. Industry Ventures’ direct investment checks range from $2 million to $12 million.
Founded in 2000 by Hans Swildens, Industry Ventures is best known as a secondaries VC investor. With the latest hybrid fund, Industry Ventures’ total assets under management now exceed $8 billion.
