Foundation Capital Secures $600M Fund, Fueling the Next Wave of Innovation with Early Investments in Solana and Cerebras

Foundation Capital has seen significant changes since it reduced its fund size from $750 million in 2008 to $282 million in 2013.

Recently, the firm announced its new flagship fund, raising $600 million—a 20% increase from its previous fund of $500 million.

Foundation has thrived by focusing solely on seed-stage investments. They’ve chosen to specialize rather than diversify like many firms do over time.

“Most firms start branching out after 30 years. We’ve stayed dedicated to the early stage,” said general partner Steve Vassallo in a chat with TechCrunch.

In fact, Foundation is the first institutional investor in over 70% of its portfolio companies.

Vassallo shared their approach: “We search for what I call ‘$0 billion’ markets in fields like enterprise, AI, fintech, and crypto. These markets come to life because of the founders.”

He pointed to Cerebras, which launched in 2016. Back then, the AI chip market barely existed. “AI workloads were tiny, and Nvidia’s GPUs were mainly for gamers,” he noted.

Now, Cerebras is worth around $4.25 billion. They filed for a public offering last fall but postponed it due to a review by the U.S. Committee on Foreign Investment.

Foundation was also the first institutional investor in Solana, a well-known blockchain platform.

Vassallo humorously compared their talent scouting to the pre-crime unit in the film Minority Report. “We look for founders even before they leave their last job,” he joked.

Foundation believes that by creating new markets, its top investments can “own their categories,” leading to better outcomes over time.

Vassallo believes the firm’s strong history of cash returns helped them raise a bigger fund. “Over the last three years, we returned about $1.4 billion to our LPs, which is more than three times what we raised from them,” he stated.

Recent successes contributing to these returns include the sale of fraud detection firm EvolutionIQ for $730 million and Venafi’s acquisition by CyberArk for $1.5 billion.

While Foundation remains committed to early-stage investments, they now need a larger fund because seed and Series A deal sizes have increased. They aim to retain 15% to 20% ownership in each company they invest in.

However, there’s been a change at Foundation. Charles Moldow, who had been with the firm for nearly 20 years and supported companies like LendingClub, retired last year, leaving just four general partners in charge.