Venture capital firm Industry Ventures has closed a hybrid fund of funds, with a total of $170 million of institutional capital, it was announced on Tuesday. The fund, which was oversubscribed, is called Industry Ventures Partnership Holdings III, L.P.
The Fund will target primary commitments and early secondary purchases in smaller venture capital funds as well as direct investments alongside its managers. This latest close brings the firm’s total capital under management to over $2 billion. It had most recently closed a $425 million secondary fund in December of last year.
Founded in 2000, Industry Ventures invests with two kinds of strategies. First, it does secondary funds that offer liquidity alternatives for direct investments and limited partnership interests. It also does funds of funds that invest in small funds with outsized return potential; this is what Industry Ventures Partnership Holdings III will do.
“Partnership Holdings focuses on investing with small venture funds, typically sub-$250 million, through LP interests, meaning primary commitments and early secondary purchases, and direct co- investments,” Roland Reynolds, Managing Director at Industry Ventures, explained to me. “The companies in these investment areas are early-stage, which are primary commitments, and mid-stage, which are early secondary purchases and direct co-investments.”
The firm’s direct co-investments are typically in Series B or C rounds for some of the break out companies which have been funded previously by fund managers in which Industry Ventures is a limited partner, he said. Those fund managers include Altos Ventures, Amplify Partners, Costanoa Venture Capital, Foundry Group, IA Ventures, Jafco Ventures, K9 Ventures, Lowercase Capital, OATV, SoftTech VC, True Ventures, and Upside Partnership among others.
“We maintain our disciplined investment strategy and are certainly paying attention to valuation relative to growth and burn rate in the current environment,” Reynolds said. “We are re-upping with our best performing fund managers and also remain committed to identifying and investing with promising new first time fund managers.”
Through its Partnership Holdings strategy, Industry Ventures has also had both direct, and indirect, exposure to some pretty big companies and investment opportunities, including Twitter, Uber and Zynga.
With the new fund, Industry Ventures expects to invest with between 10 to 15 firms and make 15 to 20 direct co-investments.
“Our partnership holdings strategy will continue to focus on small, outperforming VC fund managers. Collectively, they are among the best in the world at identifying investment trends and investing with the most capable and passionate entrepreneurs—we will continue to make direct co-investments in their breakout companies,” Reynolds said.
