The venture fundraising trend in 2024 is pretty clear at this point: large, established venture capital firms continue to attract capital from limited partners, while smaller, newer funds are having a harder time raising funds.
But Industry Ventures' latest fundraising should offer a sliver of good news for emerging managers.
On Tuesday, the 24-year-old firm announced it had raised $900 million in a hybrid early-stage fund to invest in emerging managers and directly back growth-stage startups alongside their managers. The fund will also buy a secondary stake in emerging managers from other limited partners.
This is Industry Ventures’ seventh hybrid fund and is more than 50% larger than its predecessor. predecessor, A $575 million vehicle raised in 2021.
The $900 million fund will be split into three parts: backing venture capital funds (40%), investing directly in promising Series B startups from its existing partnerships (40%), and acquiring stakes in emerging investment companies from other LPs looking to exit (20%).
The popular belief is that it is very difficult for emerging venture capitalists to raise money these days, but Roland Reynolds, senior managing director at Industry Ventures, says that is not what he sees with the funds his firm backs.
“We have seen that the vast majority of our managers are managing to close their deals,” he said. “It may take them another quarter or two, but most are raising larger funds.”
Part of the industry's secret may be that not all of the VCs the firm backs fit the standard definition of emerging managers.
While Industry Ventures’ new relationships are typically Fund I through Fund III companies, it will continue to invest in managers as they mature, as long as their fund sizes are $250 million or less and they focus on seed and Series A startups, Reynolds said. These managers include firms that have been in business for more than a decade, such as IA Ventures and Altos Ventures.
In addition to backing smaller, more established managers, Reynolds said it's a good time to invest in new funds started by experienced investors who are exiting larger firms.
As for direct investments, Reynolds said the firm is looking to back top Series B companies from its manager relationships. Some of the firm’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 venture capital investor in secondary investments. The latest hybrid fund brings Industry Ventures' total assets under management to over $8 billion.
