Foundation Capital, a start-up venture capital firm with offices in Palo Alto and San Francisco, has been around for 27 years, in numerous iterations. It was sprawling, it was small, it flourished, it rocked.
In 2022, it is again in expansion mode. Three years after closing its ninth fund with $350 million in capital commitments with three general partners, the company announces 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 status and hiring former founder Angus Davis. And he has plenty of offerings in his portfolio that undoubtedly continue to excite his investors.
These include fast-growing NFT marketplace OpenSea, bustling public blockchain platform Solana (Foundation was its first institutional investor), and Cohesity, a data management provider that filed a confidential application to go public on last month and which would seek a valuation between $5 billion and $10 billion. (For context, Cohesity was valued by its private investors last March at $3.7 billion.)
How to explain the rebound of Foundation? Strong links with the founders and their various networks would seem to explain part of this. It’s a perk enjoyed by any company that’s been around the block a few times and treated people well along the way.
Foundation has also embraced the unknown more aggressively, moving away from metrics and reaching out to people who haven’t started a business yet but are about to take the plunge. It can be operators within large companies, or founders who are preparing to fight again in the startup arena, or teams who are preparing to leave academia to enter the world. Business. As Ashu Garg, who joined the Foundation in 2008 and is now one of its longest-serving sponsors, explains: “Our goal is to have a handshake with someone while they are ready to start the business. It’s our business. There is no business. This is our business model.
It almost seems comical. Yet this is no joke. Given the relative amount of capital in the market today – all of which drives up valuations, even for fledgling companies – Foundation is joined by a growing number of venture capitalists who are now focusing on individuals rather than to wait for the formation of real products or teams. As VC Mark Suster of Upfront Ventures in Los Angeles recently told us of his own team, “We’ll even take the risk if you want to leave your company. . . We’ll support you in training – day zero.
Part of the Foundation’s anticipation strategy is centered on business incubation. Some of the startups that have grown within the Foundation in recent years include Cerebras, an AI chip and systems startup that was valued at over $4 billion in a November round; digital title, escrow and closeout company Doma (formerly States Title), which went public last year after merging with a blank check company (it’s been a bumpy ride since); and Turing, a company that helps find, vet and connect developers to the tech companies that need them, and which raised $87 million in Series D funding last month.
The Foundation, like other companies, is also pumping more money not only into startups, but also into emerging venture capital firms that give it access to new networks and ideas. Steve Vassallo, another longtime general partner of the firm, said it has committed about $15 million in recent years to at least 53 different companies that serve as “beacons” for Foundation deals.
Finally, Foundation has evolved the way it learns what’s bubbling. Joanne Chen, a longtime member of the team that was promoted to general partner last year and is very focused on artificial intelligence, engages with VPs of Engineering and tech founders who share ideas through Slack communities.
Meanwhile, the company 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 “business automation” and fintech – is also spending a lot more time these days on Discord channels. “That’s for sure where our crypto team is,” says Vassallo, adding “it’s not a fabulous platform, but it’s the best there is” for those looking for deals. Web3 and DeFi.
If Foundation feels compelled to get even more inventive in this go-go market, it doesn’t admit it as much.
Asked about the crazy acts the Foundation has seen or done to get a deal done, Vassallo says he’s aware of the “extensive love letters” some Foundation portfolio companies have received between fundings, but he says that its partners are content for now to walk and talk with founders around the Stanford campus or Salesforce Park in downtown San Francisco.
Garg echoes that sentiment, saying he thinks “some of the craziest things people do to get founders’ attention will be tempered as markets stabilize a bit.”
He insists that the Foundation would never engage in such antics anyway. “We talk to the founders before they change their LinkedIn. If we speak with someone at the same time as Tiger [Global], which we failed.