2/16/2024: The Foundry Group Will Not Raise a New Fund
A couple of days ago, the Foundry Group announced they will not raise a new fund and the $500M Foundry 2022 will be their last fund. The Foundry Group has $3.5B AUM and has been a great part of the startup ecosystem. The founders also founded Techstars. Brad Feld, one of Foundry’s co-founders, is one of my favorite bloggers and he wrote the startup investor must read, Venture Deals: Be Smarter than Your Lawyer and Venture Capitalist. I am not surprised the founders plan to retire after 18 years but I am quite surprised that they decided to close down the funds instead of coming up with some kind of succession plans to continue their great work. Anyway, I wish the founders the best and I am sure the network and the ecosystem they helped build up over the years will continue to flourish.
The VC industry has grown a lot in the past decade (as shown in the graph above) and it has become very competitive. With so much more money chasing a small number of good deals, it is harder to generate alpha. If you are in the fund business, you probably know that many investors spend more time fundraising than actually investing. After the go-go years of 2020-2022 and the tough IPO/M&A environment in 2023/2024, fundraising has become a super daunting task these days and the crazy amount of capital in the current VC ecosystem is most likely hurting the VC returns. In other words, we need less money into the startup ecosystem to generate sufficient returns. Furthermore, I feel people overestimate the role venture funding plays in a company’s success. IMO, right people are way more important than capital. Too much money can actually take a company on an unsustainable path and destroy the value the company brings to the customers.