Foundation Builds $595M VC Vehicle

After being asked by its limited partners to increase the size of its investment vehicles to reduce the frequency of fund-raising calls, Foundation Capital recently closed out its oversubscribed fourth fund at $595 million. The Menlo Park, Calif.-based venture capital firm?s last fund was capitalized at $275 million, and still has enough dry powder left for approximately six new deals. As such, Fund IV commitments will most likely not be tapped until sometime this fall.

“There is not going to be any fundamental change in our behavior with this fund,” said Mark Saul, a general partner with Foundation. “We?ve made six investments in the past six months? [and] are sticking to a pace of two investments per partner, per year.”

He added that his firm?s measured approach seemed to resonate with existing investors, especially since it helped Foundation avoid a good deal of the dotcom carnage experienced by other Silicon Valley venture houses.

Approximately 84% of Fund IV?s final take was provided by previous backers, while the remaining $95 million was committed by new LPs Harvard Management Co., Yale University, University of Texas, VenCap International, CSFB Investment Management, Champion Ventures, Tucker Anthony and Pilot House.

“We had to decide what was a balanced approach to having new LPs,” Saul explained. “We turned away several hundreds of millions of dollars, but still wanted to bring in a high quality group of new investors.”

Foundation Capital?s entire existing LP roster participated on Fund IV. Among the major institutional players were the California Institute of Technology, Dartmouth College, Hewlett Foundation, Horsley Bridge Partners, Northwestern University and the University of Chicago.

The firm plans to continue its traditional focus on California-based companies specializing in Internet infrastructure, enterprise applications, telecommunications and networking. Most recently, Foundation Capital participated on a $5 million follow-on Series C financing for interactive marketing company Responsys Inc. RSA Ventures also invested in the deal.

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