The venture fundraising trend in 2024 is fairly clear by now: Large, established VC firms are continuing to attract capital from limited partners, while smaller, newer funds are finding it more difficult to raise.
But Industry Ventures’ latest fundraise should offer a dash of good news for emerging managers.
On Tuesday, the 24-year-old firm announced that it raised a $900 million early-stage hybrid fund for investing in emerging managers and directly backing breakout growth-stage companies alongside their managers. The fund will also buy a secondary interest in emerging managers from other limited partners.
This is Industry Ventures’ seventh hybrid fund, and it’s more than 50% larger than itspredecessor, a $575 million vehicle raised in 2021.
The $900 million fund will be split three ways: 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 (20%).
The common lore is that it’s very challenging for emerging managers to raise funds now, but Roland Reynolds, senior managing director at Industry Ventures, says that is not what he observes with 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’s secret may be that not all VCs the firm backs fit the standard definition of emerging managers.
While Industry Ventures’ new relationships are usually firms on funds I through III, it will 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 said. These managers include firms that have been around for over a decade, including IA Ventures and Altos Ventures.
In addition to backing more-established small managers, Reynolds said it’s a good time to invest in new funds started by experienced investors who are leaving large firms.
As for direct investments, Reynolds said the firm is looking to back the best Series B companies sourced 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 into companies range from $2 million to $12 million.
Industry Ventures was founded in 2000 by Hans Swildens. The firm is best known as a secondaries VC investor. The latest hybrid fund brings Industry Ventures’ total assets under management to over $8 billion.