The trends in venture funding for 2024 are pretty clear at this point: large, established VC firms continue to raise capital from limited partners, while smaller, newer funds are finding it harder to raise capital.
But Industry Ventures' latest funding should provide a bit of good news for emerging managers.
On Tuesday, the 24-year-old firm said it had raised a $900 million early-stage hybrid fund to invest in emerging managers and directly back fast-growth companies alongside those managers. The fund will also buy secondary interests in emerging managers from other limited partners.
This is Industry Ventures' seventh hybrid fund and is more than 50% larger than its predecessor fund, which raised $575 million in 2021.
The $900 million will be split into three parts: backing the venture capital fund (40%), direct investments in promising Series B startups from existing partnerships (40%), and acquiring equity stakes in emerging investment companies from other LPs seeking exit strategies (20%).
While the general consensus is that it is extremely difficult for emerging managers to raise capital at the moment, Roland Reynolds, senior managerial director at Industry Ventures, says he isn't seeing that at the funds his firm backs.
Roland Reynolds, Industry Ventures
“The majority of our managers have raised capital,” he said. “It might take a quarter or two longer, but the majority are [raising] Larger fund size.”
Part of the industry's best-kept secret may be that not all of the VCs it backs fit the standard definition of an emerging manager.
Industry Ventures' new relationships are typically with firms in Fund I to III, but Reynolds said the company will continue to invest in managers as they mature, as long as their fund size is under $250 million and they specialize in seed and Series A startups. These managers include firms that have been around for more than 10 years, such as IA Ventures and Altos Ventures.
In addition to backing smaller, more established managers, Reynolds said now is also a good time to invest in new funds launched by experienced investors leaving larger firms.
As for direct investments, Reynolds said the firm looks to back blue-chip companies in their Series B rounds raised through relationships with managers. The firm's recent deals include online banking and money management platform Relay and robotics company Cobot. Industry Ventures' direct checks into companies have ranged from $2 million to $12 million.
Industry Ventures was founded by Hans Swildens in 2000. The firm is best known as a secondary VC investor. With its latest hybrid fund, Industry Ventures has total assets under management of more than $8 billion.