San Francisco-based Industry Ventures announced on Tuesday that it has closed $900 million for a fund aimed at investing in early-stage technology’s emerging managers and companies. The firm describes this fund as a “hybrid fund” because it will commit 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 has pursued this hybrid strategy since 2009. During this time, Managing Director Roland Reynolds has witnessed various market cycles for emerging managers seeking to raise new funds. He notes that the current fundraising climate is much more challenging compared to a couple of 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.”
Despite tighter investment capital, Reynolds is optimistic that those who manage to close funds will achieve stronger-than-usual returns, partly due to the rise of AI-enabled business models. Industry Ventures has been active across various tech sectors, making recent investments in robotics and enterprise software. In April, for example, Industry Ventures participated in a $100 million Series B for Collaborative Robotics, a developer of workplace robots, and led a $50 million Series B for Coalesce Automation, which develops data management software.
The firm plans to allocate about 40% of the new fund to emerging managers of early-stage funds, 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 be used to buy stakes in mostly early-stage funds from institutional investors such as endowments and family offices seeking liquidity or to exit the asset class. Industry Ventures typically buys stakes in venture and seed funds that started investing three to five years ago, with the expectation that it will take many more years to produce sizeable exits.
With the latest fundraising, Industry Ventures now manages more than $8 billion in committed capital. Of that, $2.3 billion is earmarked for early-stage hybrid funds focusing on U.S. companies and managers.
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