The fund is slightly larger than its $282 million predecessor, closed in April 2013, but it’s far smaller than the $750 million that Foundation closed in 2008 for its sixth fund. In an email exchange last night with general partner Paul Holland, who joined the firm more than 14 years ago, we asked about Foundation’s size and staff, as well as where the firm might be shopping in 2016.
TC: This eighth fund has four partners — you, Ashu Garg, Charles Moldow, and Steve Vassallo. That’s down from eight general partners at the outset of the seventh fund. We know one of those former GPs, Ashmeet Sidana, started his own fund. What happened to the others? Is this part of a right-sizing from that giant fund raised in 2008?
PH: Fund 7 began with seven general partners and over the course of Fund 7, two partners stopped the active investing phase of their careers. As you mentioned, Ashmeet went on to start his own fund. We now have four full time GPs in Fund 8, a team that has been working together successfully over the last seven years.
TC: What size checks will the firm be writing? Will initial checks still range from $1 million to $10 million at the outset? How many companies does Foundation expect to back with this new fund?
PH: Yes, the initial check size can be between $1 million and $10 million, and [as with our last fund], we budget a total of $13 million to $14 million over the life of each company.We will occasionally invest more in special cases where we can still see venture-style returns.
TC: What are some new areas of interest?
PH: We continue to invest across a range of sectors from consumer to IT and marketing tech. A keen area of interest is design-oriented founders, with Steve Vassallo — a product designer by background — leading this charge. We’re also looking at new marketplace models and [have] a continued focus on fintech.
TC: What are the firm’s biggest outcomes over the last five years?
PH: We’ve had a very successful run. In the last five years, we’ve had 11 IPOs, with seven of those in the last two years across multiple funds — Lending Club being the biggest. Other notable IPOs include Responsys [a marketing software company that went public in 2011 and was acquired by Oracle in 2013]; [solar installer] Sunrun [which went public in August]; [the ad tech company] TubeMogul [which went public in July 2014]; Chegg [the textbook rental service, which went public in late 2013]; and MobileIron [which went public in June 2014 and whose software protects data accessed by employees on smartphones].
TC: What’s been the biggest miss in recent years, and why did the firm pass?
PH: We got very close on several companies that have gone on to be big but probably most notable, or one that stings a bit, is Tesla . . .[W]e felt it would be too capital intensive when we first saw it. At the time, this was a fundamental filter for us in that sector. And while it did prove to be capital intensive, if we had a time machine we’d go back and be more aggressive about doing Tesla.
TC: What was foundation hearing out on the fundraising trail? What’s the biggest concern of institutional investors right now?
PH: The number one concern is the perception of excessive valuations on late-stage private companies and the relatively high prices of early-stage rounds for this era of investments.