San Francisco-based Industry Ventures announced Tuesday that it has closed on $900 million for a fund that will invest in early-stage technology’s emerging managers and companies.
The firm describes the vehicle as a “hybrid fund” as it will make commitments to venture and seed investors, back rounds for individual startups, and buy stakes in early-stage funds from existing shareholders.
Although Industry Ventures is best known as a secondary investor, it’s been pursuing this hybrid strategy since 2009. In that time, managing director Roland Reynolds, has seen his share of market cycles for emerging managers looking to raise new funds.
The current climate, he observed, is sharply different than it was a couple years ago.
“This is a much more challenging fundraising environment,” Reynolds said. “To get a flat or slightly larger fund size is a big win.”
AI pitches in
But while investment capital is tighter, Reynolds said he’s optimistic that those who do manage to close funds will go on to post stronger-than-usual returns. That’s partly due to the rise of AI-enabled business models, although Industry Ventures has been pretty active across a variety of tech sectors.
Recent investments range from robotics to enterprise software. In April, for instance, Industry Ventures participated in a $100 million Series B for Collaborative Robotics, a developer of workplace robots. The firm also led a $50 million Series B for Coalesce Automation, which develops data management software.
Going forward, the firm plans to allocate about 40% of the new fund into emerging managers of early-stage funds that are typically $250 million or less. Another 40% will go to direct investments in startups, usually at around Series B.
The remaining 20% of the capital will go to buy stakes in mostly early-stage funds from institutional investors such as endowments and family offices who are seeking liquidity or to exit the asset class. Industry Ventures typically buys stakes in venture and seed funds that started investing between three and five years ago, with the expectation that it will likely take many more years to produce sizable exits.
With the latest fundraise, the firm now has more 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. companies and managers.
Illustration: Dom Guzman
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