Foundation Capital's Revival

Foundation Capital has come a long way since it was forced to scale down its fund size from $750 million in 2008 to $282 million in 2013. On Tuesday, the 30-year-old firm announced that it raised a $600 million eleventh flagship fund, which is 20% larger than the predecessor $500 million fund it closed about three years ago.

Foundation credits its revival with sticking to its knitting: seed-stage investing. The firm is the first institutional investor in over 70% of its portfolio companies and looks for what it calls '$0 billion' markets in enterprise, AI, fintech, and crypto.

One of its successful investments is Cerebras, which launched in 2016 from Foundation Capital's office. At that time, the AI chip market was virtually nonexistent, but since then, Cerebras has grown into a company valued at $4.25 billion.

Foundation Capital was also the first institutional investor in the blockchain platform Solana. Other recent exits include the sale of fraud detection company EvolutionIQ to CCC for $730 million and the acquisition of cybersecurity startup Venafi by CyberArk for $1.5 billion.

Investment Strategy

Foundation claims that by creating new markets, the firm's winning investments end up 'owning their categories,' leading to exponentially better outcomes. The firm's general partner, Steve Vassallo, attributed the firm's ability to raise a larger fund than its predecessor in this market to the firm's history of high cash distributions.

Although Foundation is firmly sticking to its early-stage strategy, it claims it needs a larger fund because the size of seed and Series A deals has grown, and the firm wants to continue to own 15% to 20% of each company when it first invests.