Foundation’s Paul Holland: Smaller fund, smaller fundings right for times
Foundation Capital Partner Paul Holland says the firm’s latest fund is smaller than the previous ones by design, a reaction to how little startups need these days to get off the ground.
- Cromwell Schubarth
- Senior Technology Reporter- Silicon Valley Business Journal
A lot has happened in the year that Foundation Capital started raising money for its seventh fund, according to Partner Paul Holland.
Instead of what had been reportedly planned as a half billion fund, the Menlo Park firm on Tuesday closed a $282 million pool to invest from.
“Startups don’t need as much money now, thanks to the cloud and other factors,” Holland told me. “Startups are using about 40 percent less capital, on average, so we don’t need as much capital to invest.”
He said the smaller fund size was a conscious reaction to the changing startup environment.
“We raised our last fund, which was $750 million in 2008, when we thought we would be doing more cleantech and later-stage deals,” he said. “It took us five years to invest, which is frankly too long. We wanted to have a fund that we thought we could finish investing in three years.”
The new fund will be targeting about 60 percent of its cash at IT startups, about 30 percent to 35 percent at consumer startups and up to 10 percent in cleantech.
“We do about two-thirds of our investments in seed or Series A rounds but we will invest in later rounds when we find something that suits us,” Holland said.
There will be right of the firm’s 13 partners investing from the fund, including new partner Anamitra Banerji, who developed Twitter’s ad platform as one of the micro-blogging company’s earliest employees.
“We have a heritage of partners who stay around for quite a while after they have finished actively investing,” Holland said. “They stay involved with the firm and with the companies they have invested in.”
General Partner Rich Redelfs is the only partner who has newly stepped back from investing, he said.
Despite working with a smaller fund, Holland said he is more excited about the startups he sees now than he was 10 years ago.
“There is a real tailwind behind early stage investing right now,” he said. “The difference between now and 10 years ago is night and day. It’s a lot easier to create returns on small amounts of money now than ever in my experience.”
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Cromwell Schubarth is the Senior Technology Reporter at the Business Journal. His phone number is 408.299.1823.
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