Foundation Capital to Seek $750M for Its Seventh Fund

Silicon Valley venture firm Foundation Capital is looking to raise a seventh fund totaling $750 million, sources tell peHUB. The fund, still in pre-marketing, will try to match the size of its 2008 vehicle, a $750 million fund that at the time dedicated itself substantially to cleantech investments.

Foundation did not respond to peHUB’s requests for comment.

Whether Foundation continues its plans to heavily invest in cleantech remains to be seen.

Not much is available on Foundation Capital’s past fund performance. For its first six funds, the only available figures come via University of Texas pension fund UTIMCO, which invested in the VC’s fourth fund. That fund generated an IRR of about 5% as of the February, according to UTIMCO.

Foundation’s signature investment to date may be entertainment titan Netflix, which it backed with its second fund. More recently, Foundation has pumped capital into online textbook retailer Chegg’s Series C, provided seed funding to kids’ gaming company AiryLabs, and contributed to several rounds for Silver Spring Networks (which is in registration to go public). Foundation also participated in a recent round for Read It Later, a content storage company.

Foundation’s sixth fund has backed at least 35 companies, according to Thomson Reuters (publisher of peHUB). Of that number, 27 are active private companies, four have been acquired (Bella Pictures, Biz360, Prematics and SiBEAM), two have gone public (Envestnet and Tree House Education and Accessories), one has registered for an IPO (Silver Spring Networks), and one filed for Chapter 7 Bankruptcy (Canopy Financial).

None of the acquisitions from fund VI appears to have been a big hit. SiBEAM was purchased in April for $24.3 million by Silicon Image after raising close to $140 million in VC; Bella was acquired in January for an undisclosed amount by CPI Corp. after raising a total of $59.7 million in VC; Prematics was bought by NaviNet for an undisclosed amount in December 2010 after raising a total of $36.8 million in VC; and Biz360 was snapped up by Attensity in April 2010 for an undisclosed price after raising $40.4 million in VC, according to Thomson Reuters.

Canopy Financial’s collapse came barely a year after Foundation pumped $8 million into the company, leaving investors asking difficult questions of the startup.

Foundation will conduct its latest fundraising effort without Adam Grosser, who left to join Silver Lake early stage investment vehicle Kraftwerk, which makes cleantech and energy investments. A source who spoke with peHUB about Foundation’s forthcoming fundraising indicated that the VC could alter its investment strategy from its prior fund in the wake of Grosser’s departure.

The closing of Foundation’s sixth fund, another $750 million vehicle, came with the declaration it would spend up to a third of that capital on cleantech deals.

According to Thomson Reuters, the sizes and vintages of Foundation’s previous funds are as follows: Foundation Capital V, $525 million, 2006; Foundation Capital IV, $595 million, 2002; Foundation Capital III, $275 million, 2000; Foundation Capital II, $98 million, 1998; and Foundation Capital I, $75 million, 1995. The firm also raised two side funds in 2000 — Foundation Capital Leadership Fund and Foundation Capital III Entrepreneurs Fund, a $150 million and $31 million vehicle, respectively.

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