Foundation Capital Launches $500M Fund After Early Solana Bets

Foundation Capital's Continued Growth and Evolution

For 27 years, Foundation Capital, a venture firm operating from Palo Alto and San Francisco, has undergone numerous transformations. Throughout its history, the firm has experienced periods of both expansion and contraction, success and challenge.

Securing a New Fund and Expanding the Team

Currently, in 2022, Foundation Capital is once again in a phase of growth. Having successfully closed its ninth fund with $350 million in committed capital three years prior, the firm has announced the securing of $500 million for its tenth flagship fund.

The team has also expanded, now comprising six general partners. This growth includes the promotion of two investors to general partner roles and the addition of Angus Davis, a former founder.

A Portfolio of Promising Investments

Foundation Capital’s investment portfolio includes several high-potential companies. These include the rapidly expanding NFT marketplace OpenSea, the innovative public blockchain platform Solana – in which Foundation was the first institutional investor – and Cohesity, a data management company that recently filed for an initial public offering.

Cohesity is reportedly aiming for a valuation between $5 billion and $10 billion, a significant increase from the $3.7 billion valuation it received from private investors in March of the previous year.

The Key to Foundation’s Success

A significant factor in Foundation’s resurgence is its strong relationships with founders and their networks. This is a natural advantage for any firm with a long-standing history of positive interactions within the industry.

Embracing Early-Stage Opportunities

Foundation Capital has also proactively sought out opportunities at earlier stages, shifting its focus from solely relying on established metrics to identifying individuals poised to launch new ventures. This includes operators within larger corporations, returning founders, and teams emerging from academic institutions.

As Ashu Garg, a long-serving general partner at Foundation, explains, the firm aims to establish an agreement with potential founders before the company is even formed. “That is our business model,” he states.

A Growing Trend in Venture Capital

This approach, while seemingly unconventional, is becoming increasingly common in the current market. With abundant capital driving up valuations, many venture firms are now prioritizing individuals over fully developed products or teams. Mark Suster of Upfront Ventures in LA recently stated his team will “back you at formation – at day zero.”

Incubating Startups for Future Growth

Foundation Capital actively participates in incubating companies. Recent successes emerging from this process include Cerebras, an AI chip and system startup valued at over $4 billion, Doma (formerly States Title), a digital title and escrow company that went public, and Turing, a platform connecting developers with tech companies, which secured $87 million in Series D funding.

Investing in Emerging Venture Firms

In addition to direct investments in startups, Foundation Capital is also allocating capital to emerging venture firms. This strategy provides access to new networks and innovative ideas. Steve Vassallo, a general partner at the firm, reports committing approximately $15 million to at least 53 different venture outfits, viewing them as sources of potential deals.

Leveraging New Information Channels

Foundation Capital is also refining its methods for identifying emerging trends. Joanne Chen, a general partner focused on artificial intelligence, actively engages with VPs of engineering and technical founders through Slack communities.

Furthermore, some partners dedicate significant time to monitoring projects on platforms like GitHub, while others focus on Discord channels, particularly for identifying opportunities in the web3 and DeFi spaces. Vassallo notes that while Discord isn’t ideal, it’s currently the most effective platform for this purpose.

Maintaining a Focus on Founder Relationships

Despite the evolving market, Foundation Capital remains committed to its core principles. When asked about competitive tactics, Vassallo acknowledged awareness of “extensive love letters” offered to portfolio companies but affirmed that his partners are content with building relationships through direct engagement with founders.

Garg believes that more extreme tactics will likely diminish as the market stabilizes, and he emphasizes that Foundation would never resort to such measures. “We’re talking with founders before they’ve changed their LinkedIn,” he asserts, adding that if they are speaking with a founder simultaneously as Tiger Global, they have already missed the opportunity.