Foundry Group Next
Over the years at Foundry Group we’ve built an extensive network of companies. While we’ve invested in some of these directly, this actually represents the smallest set of companies that we are involved with. We have also invested indirectly in many others through our investment in Techstars. Yet another, and much larger set of companies, come from our investments in other venture funds.
In 2013, we started thinking hard about the future of Foundry Group. When we started Foundry in 2006 we were very clear that we were not going to build a legacy firm. There would be no generational planning, no transitions to younger partners, and no senior partner hold-outs who would hang onto economics well after they had stopped working. Simply put, when we are done investing, we will drop the mic and shut off the lights.
During these discussions, we reflected on the incredible collection of early stage VC firms we’ve invested in personally over the years. We’ve been investing as individuals in venture firms going back almost 20 years. The four of us have served as mentors, and in a number of cases, formal advisors to funds around the world. In 2010 we started making the majority of our fund investments together through a common entity. While we never thought hard about this activity, over the years we’ve amassed a very strong track record through these fund investments. It’s also been fun – a great way to get close to new managers, build lasting personal relationships, and see deal flow for our Foundry Group investing activity.
In late 2014 the four of us got together to talk formally about the future of Foundry Group. We had each taken a month off in 2014 – well needed breaks after what had been a seven year sprint since starting Foundry Group. We were clear at that point that we wanted to continue to make early stage investments through a new Foundry Group fund, which we subsequently raised in the middle of 2015 and started investing at the end of the year.
At the same time we discussed our later stage investment strategy. In 2013 we raised a fund called Foundry Group Select. The strategy behind Select is to make late stage investments into successful companies where our early-stage funds had previously invested. The strategy has been a good one and with two early exits (Gnip and Fitbit) we’ve already returned significant capital.
As a result of our extensive networks, we constantly see other potential late stage investments. We’ve stayed away from these investments, not because they aren’t interesting, but because with the Select fund strategy we had limited ourselves to investing in existing Foundry portfolio companies. We broke this rule recently to make an investment in AvidXchange, a business run by an entrepreneur who I have known for over 20 years. The conversation around AvidXchange brought to light the magnitude of the opportunity we have to invest in interesting companies outside of our early stage portfolio.
We also had a long conversation about our GP fund investing strategy. It is clear to us that we enjoy investing in other VC funds and working to support the GPs. When we looked carefully at our track record, it became clear to us how lucrative this activity has been.
As we discussed the confluence of our fund investing strategy, our current Select strategy, and our interest in acting on our unique later stage deal flow, we realized that there was an opportunity to wrap these three ideas together into a single entity that would encompass not just what we had previously called our Select strategy but would also institutionalize our fund investment strategy as well as leverage those and other relationships to invest in other later stage opportunities in our broader network.
The critical ingredient for bringing this all together was finding the person to help us execute our GP fund strategy. Fortunately we knew exactly who we wanted to work on this project.
For the past 13 years, Lindel Eakman has been the head of UTIMCO’s private equity group. He’s created an incredible portfolio of investments in venture capital funds, including Union Square Ventures, Spark Capital, True Ventures, IA Ventures, Techstars Ventures, and Foundry Group. In April 2007, Lindel committed to be our largest investor in our first fund in 2007, taking 20% of the fund. This was a bold move, as we only had one commitment at the time.
Lindel – through UTIMCO – has continued to be our largest investor. He has been on our advisory board and for the past eight years has been a key advisor to us. Over the years he also has become a close friend.
We’ve been discussing this strategy with Lindel for most of the last year and have started calling the initiative “Foundry Group Next”. The Next strategy will not only allow us to continue making direct investments in high-potential startups, but will also scale-up our ability to support venture firms and funds whose vision and values align with ours. Through this activity, we hope to spread the Foundry Group values and DNA further into the overall venture and startup ecosystem.
We are pleased to welcome Lindel to Foundry Group Next and are excited to start this new chapter with him. And to make the the lawyers in our lives happy, we need to say that in no way is this blog post an offer to sell securities or an advertisement of us raising a new fund. We have yet to announce anything regarding any new funds that we may raise in the future.