As all of you know Nov 6th is election day. At Foundry we’ve decided to make sure that our employees have the time they need to vote that day by participating in #TimeOffToVote – a nationwide effort to encourage employers to make accommodations for their employees to participate in the election. We hope you’ll consider whether participating in this effort makes sense for your company as well.

 

 

We are happy to announce the closing of our seventh fund, Foundry Group Next 2018. The $750 million fund combines all of our prior fund strategies – our early stage, early growth, and partner fund investments – into a single fund.

For historical reference, our early-stage funds (FG 2007, FG 2010, FG 2013, and FG 2016) are all $225 million in size. Our first early growth fund raised in 2013, Foundry Group Select, is also $225m in size. In 2016, when we raised Foundry Group Next, we approximately doubled the size of that fund to $500 million since 30% of it was going to be invested in partner funds and 70% in early growth. So, at the beginning of 2016, we effectively raised $725 million (FG 2016 and Foundry Group Next). Foundry Group Next 2018 is simply the combination of those two funds rounded up slightly.

Our strategy is unchanged – we’ve just combined all of our investing activity into one fund going forward. When we started Foundry Group, we had four equal partners. We now have seven equal partners. We invest all over the United States and Canada. We have a deliberate and focused set of themes that encompass almost all of our investments. We are syndication agnostic, being indifferent between investing by ourselves or with co-investors – especially our partner funds – where we mostly have long and successful relationships. Our goal is to have significant ownership in companies we are investors in (often over 30%). We are very long-term investors, focusing on net cash on cash returns, rather than short-term or intermediate IRRs.

While we have an early entry point from our historical early-stage investing, we don’t have to be the first investor in a company. With the Cambrian explosion of seed funds that has occurred in the last five years, we’ve chosen to invest in these funds directly (which we call our partner funds) rather than try to chase seed investments all around the country. If a company hasn’t raised more than $5 million, we are a good target, as long as it is in the US (or Canada) and in one of our themes.

We are full lifecycle investors and willing to invest, and lead, Series A, B, and C rounds. We refer to B and C rounds as early growth – essentially financings with valuations between $50m and $300m pre-money. By being syndication agnostic, we are happy to lead multiple rounds of companies we are already investors in, but we also love to welcome in co-investors who we like and respect, along with any of our LPs who want to participate directly alongside us.

We have a small team (16 people total). The seven partners all work directly with the companies and partner funds. We have a CFO, a General Counsel, six EAs, and one fund investment associate. We don’t expect or intend to add anyone to our team going forward.

We’ve worked hard to have a network-centric view of the world. As a small team based in Boulder, Colorado, we have developed a very broad network which includes all of the entrepreneurs we work with, our LPs, VCs we co-invest with, our partner funds, several startup studios, Techstars, and many other colleagues through our writing, startup community leadership, and non-profit activities. We think of ourselves as one node on a mesh network, an important node, but not a central node through which everything must flow. We subscribe to the notion of #GiveFirst and try to be helpful to everyone we come in contact with.

We know who we are at year 12 in our journey as a firm, love what we do, and try very hard to do it clearly, honestly, authentically, and transparently with everyone we interact with. Creating and building companies is extremely hard, and we have deep respect for everyone we get to work with through all the ups and downs.

We very much look forward to continuing to work with everyone we currently work with, as well as another group of great entrepreneurs and VC fund managers in our Foundry Group Next 2018 Fund. We are also happy to welcome a small number of new Limited Partners to our family. We are pleased to partner with such a great group of investors.

Thanks for allowing us to be part of your journey.

– Jason, Ryan, Seth, Brad, Lindel, Moody, and Jamey

Our friends at High Alpha just announced their new High Alpha Studio and High Alpha Capital fund. We are proud to be partnered with them across both efforts.

When we make an investment, whether into a company or into a fund, we always start with the people. First and foremost, we have to believe that the people we are backing are good humans, and that, taken together, they form a team that is greater than the sum of the parts. We want to invest in teams that have a positive impact on their companies, portfolios, and broader communities. Next, we need to see a compelling strategy that maps well to the strengths of the team. There are a number of different winning approaches in venture, but not all teams are equally well-suited to execute a given strategy. Specifically, we don’t think that there are many teams that are well-suited to succeed executing a studio concept. It takes a particular set of skills, experiences, and personalities to pull it off. With a team like High Alpha, the studio model is incredibly powerful and allows a small firm to become a huge talent multiplier.

We believe the entire team at High Alpha, starting with partners Scott Dorsey, Eric Tobias, Kristian Andersen, and Mike Fitzgerald, are some of the highest quality humans in the venture industry. They have the experience both as company-builders and as investors to support a studio model. They are strong contributors to their local community in Indianapolis and we’ve seen them discover, source, and attract major entrepreneurial talent across their platform.

High Alpha Studio creates, operates, and supports new companies by providing a blend of services and resources including product development, sales and marketing, finance, brand and design, and talent development. The entrepreneurs they have worked with provided some of the best references we’ve ever received. We love the team’s “midwest mentality” and their reach across non-coastal markets with a direct focus on next-generation enterprise cloud companies.

We know the High Alpha team will foster a web of talent that will be additive to our own network. Their efforts to develop the Indianapolis market remind us of our friends at PSL in Seattle and, perhaps, even of our own early days in Boulder. Given High Alpha’s focus on B2B SaaS companies, there is a lot of overlap with our Glue and Protocol investment themes. As a result, we are confident that we can be helpful to their portfolio and that we may even find a few companies to invest in directly.

Our investment in High Alpha also gives us a chance to invest directly alongside our friends at Emergence Capital. We have known and deeply respected the Emergence team for nearly 15 years, both as LPs and now co-investors and are excited to have more interaction with them as supporters of High Alpha Studio.

In addition to our investment in High Alpha Studio II, we also invested in High Alpha Capital II, an $85M Seed and Series A venture capital fund. We’ve seen the High Alpha Capital team in action as co-investors in two of our Foundry portfolio companies: Dwolla and Integrate. The High Alpha partners have exhibited a proven ability to recognize successful business models and help companies as board members and advisors. High Alpha Capital II will invest in High Alpha Studio companies as well as in companies that come to them through their broader network. The ability to invest in High Alpha Studio companies creates a distinct sourcing advantage and additional ownership for fund investors. As an added bonus, we get to invest in High Alpha Capital alongside Greenspring Associates, who have been long-time friends and supporters of both Foundry and Emergence, thus keeping it all in the family!

We’re thrilled to welcome the whole team and portfolio at High Alpha into the Foundry family and thank Scott, Eric, Kristian, and Mike for letting us be part of the journey.

We welcome Wave Capital to our Partner Fund portfolio. Based in San Francisco, Wave was launched last year by Sara Adler, Riley Newman, and David Rosenthal. Wave specializes in companies creating marketplaces and invests in companies at their earliest stages, as they build their teams, find product market fit, and work towards their Series A.

Leveraging their Bay Area roots and deep Silicon Valley networks, the Wave team is targeting top talent spinning out of major tech companies like Airbnb, where Riley built and led the Data Science team and Sara launched the Corporate Development program. They will also target marketplace startups in Seattle, where David spent over six years investing in early stage companies at Madrona Venture Group.

Wave’s focus on marketplaces was immediately intriguing to us, given our own marketplace investment theme. We initially met David through our co-investment with Madrona in the dog care marketplace, Rover, where David worked closely with the founding team. Throughout his venture career, David has won the hearts of many founders, who think of him more as a co-founder than an investor — someone who not only shares their vision for the company but rolls up his sleeves and works side by side with them in the startup trenches. Riley brings a data-driven, operator perspective as one of the first ten employees at Airbnb, growing its Data Science program from a team of one to over one hundred. Sara rounds out the team with extensive Corporate Development experience at AirbnB, Dropbox, and Facebook, bringing deep knowledge of long-term growth strategy and what it takes to get to a successful exit.

We’re excited about Wave’s network and ability to help marketplace companies at their earliest stages. We think of Wave as a window into the next generation of great founders focused on building highly scalable marketplaces across many industries. We’re thrilled to partner with Wave as they build their firm and first portfolio and look forward to co-investment opportunities as their companies grow. You can learn more about Wave and their new fund here and here.

We’re pleased to announce that Foundry Group portfolio company MakeTime has been acquired by Xometry. This acquisition brings together the country’s two top manufacturing network businesses and creates the largest on-demand manufacturing platform in the United States. As part of the transaction, Foundry Group Next led a $25 million round of financing for the newly combined company. Almaz Capital, BMW’s iVentures, GE Ventures, Highland Capital Partners and Maryland Venture Fund also participated in the round.

We first invested in MakeTime in 2016, having followed the company and the on-demand manufacturing market closely for over a year prior to that. Driven by fragmentation in the $80 billion market for on-demand manufacturing, the thesis behind MakeTime was to bring order to the often opaque and manual process of finding parts manufacturers. Much of this market is driven by small and medium sized manufacturers – there are approximately 190,000 manufacturers with fewer than 20 employees in the US alone – and there exists no common directory, no view to individual machine shop capacity, or understanding of any given machine shop’s speciality or performance history. The majority of projects in this market are sourced through slow RFP processes which rely on prior vendor relationships and lack even the most basic automation.

In contrast, the combined Xometry/MakeTime business will have access to 2,300 partner manufacturers ranging in capabilities from 3D printing prototypes to CNC machining to injection molding. This partner network, combined with Xometry’s real-time pricing capabilities, allows Xometry customers to confirm parts orders instantly on the Xometry platform. We are excited to have the opportunity to combine the two businesses and create a clear leader in on-demand manufacturing. Both businesses shared a common vision around this space and bring complementary skills and capabilities that they will work to combine into a single platform in the coming months.

The combined business will be run by Randy Altschuler, Xometry’s CEO, and headquartered in Maryland. MakeTime’s office in Lexington, KY will continue to operate and the business anticipates expanding in both locations. Drura Parrish, MakeTime’s founder and CEO will become Xometry’s Executive Vice President for Platform.

We’re excited to continue to work with Drura on the new business and welcome Randy and the entire Xometry team to the Foundry Group family.