An early bet on Solana and others has led to a new, $500M fund for Foundation Capital

An early bet on Solana and others has led to a new, $500M fund for Foundation Capital

Foundation Capital, an early-stage venture firm with offices in Palo Alto and San Francisco, has been around for 27 years, in many iterations. It has been sprawling, it has been small, it has thrived, it has teetered.

In 2022, it’s in expansion mode once again. Three years after closing its ninth fund with $350 million in capital commitments with three general partners, the firm is announcing that it has secured $500 million for its tenth flagship fund. It now has six general partners, having promoted two of its investors to general partner and hired former founder Angus Davis. And it has a lot of deals in its portfolio that undoubtedly continue to excite its investors.

Among these is the fast-growing NFT marketplace OpenSea, the buzzy public blockchain platform Solana (Foundation was its first institutional investor), and Cohesity, a data management vendor that confidentially filed to go public last month and is reportedly seeking a valuation of between $5 billion and $10 billion. (For context, Cohesity was valued by its private investors last March at $3.7 billion.)

How to explain Foundation’s rebound? Strong connections to founders and their various networks would seem to explain part of it. It’s a benefit enjoyed by any firm that has been around the block a few times and treated people well en route.

Foundation has also more aggressively embraced the unknown, moving away from metrics and toward individuals who haven’t started a company yet but are on the cusp of making the jump.

These might be operators inside big companies, or founders who are preparing to do battle in the startup arena again, or teams preparing to spin out of academia and into the business world.

As explains Ashu Garg, who joined Foundation in 2008 and is now one of its longest-serving general partners, “Our goal is to have a handshake deal with someone as they’re ready to start the company. That’s the business that we’re in. There is no company. That is our business model.”

It almost sounds comical. Yet it’s no joke. Given the amount of capital in the market today relative — all of it driving valuations sky high for even fledgling companies — Foundation is joined by a growing number of venture firms that now zero in on individuals rather than wait on actual products or teams to form. As VC Mark Suster of Upfront Ventures in L.A. recently told us of his own team, “We’ll even take a risk on you want to leave your company . . . We will back you at formation — at day zero.”

Part of Foundation’s go-earlier strategy centers on incubating companies. Some of the startups to rise up inside of Foundation in recent years include Cerebras, an AI chip and system startup company that was valued at more than $4 billion in a November round; the digital title, escrow and closing company Doma (formerly States Title), which went public last year after merging with a blank-check company (it has been a bumpy ride since); and Turing, an outfit that helps source, vet and connect developers with tech companies that need them, and which raised $87 million in Series D funding last month.

Foundation, like other firms, is also plugging more money not just into startups but emerging venture firms that give it access to new networks and ideas. Steve Vassallo, another longtime general partner at the firm, says it has committed roughly $15 million in recent years into at least 53 different venture outfits that serve as “beacons” for Foundation deals.

Not last, Foundation has evolved the way that it learns what’s bubbling up. Joanne Chen, a longtime member of the team who was promoted to general partner last year and is very focused on artificial intelligence, engages with VPs of engineering and technical founders who share ideas through Slack communities.

Meanwhile, the firm has partners who spend 10 hours a day trying to figure out which projects on Github are taking off,” says Vassallo. The team — which is very focused on the “automation of the enterprise” and fintech — is also spending far more time these days in Discord channels. “That’s for sure where our crypto team is,” says Vassallo, adding that “it’s not a fabulous platform, but it’s the best of what exists” for those hunting down web3 and DeFi deals.

If Foundation feels pressured to become even more inventive in this go-go market, it isn’t admitting as much.

Asked about crazy acts that Foundation has either seen or committed to land a deal, Vassallo says he is aware of “extensive love letters” that certain Foundation portfolio companies have received between financings, but he says his partners are content for now to walk and talk with founders around Stanford’s campus or Salesforce Park in downtown San Francisco.

Garg echoes the sentiment, saying that he thinks “some of the crazier things folks are doing to get the attention of founders will  be tempered as markets settle down a little bit.”

He insists that Foundation would never engage in such antics either way. “We’re talking with founders before they’ve changed their LinkedIn. If we’re talking with someone at the same time as Tiger [Global], than we’ve failed.”

Source: TechCrunch