Venture capital firm Foundation Capital has announced the successful raise of its eleventh flagship fund, totaling $600 million. This marks a 20% increase from its previous $500 million fund, which was closed about three years ago. The 30-year-old firm has made a remarkable comeback since scaling down its fund size from $750 million in 2008 to $282 million in 2013.

According to General Partner Steve Vassallo, the firm's revival can be attributed to its unwavering focus on seed stage investing. Unlike many firms that have been around for 30 years, Foundation Capital has resisted the temptation to diversify into multi-stage, multi-geography, and multi-strategy investments. Instead, it has stuck to its knitting, concentrating on the early stages of startup development.

Vassallo emphasized that the firm looks for what he calls "$0 billion" markets in enterprise, AI, FinTech, and crypto. These are markets that don't exist until founders create them. He cited the example of Cerebras, which launched in 2016 from Foundation Capital's office, when the AI chip market was virtually nonexistent. Today, Cerebras is valued at $4.25 billion.

Foundation Capital has been the first institutional investor in over 70% of its portfolio companies, including Cerebras and blockchain platform Solana. The firm's recent exits include the sale of fraud detection company EvolutionIQ to CCC for $730 million and the acquisition of cybersecurity startup Venafi by CyberArk for $1.5 billion.

Vassallo likened the firm's approach to identifying founders to the pre-criminals in the movie Minority Report. "We sometimes joke about identifying pre-founders before they've even left their last job," he said. By creating new markets, the firm's winning investments end up "owning their categories," leading to exponentially better outcomes.

The firm's ability to raise a larger fund than its predecessor in this market can be attributed to its history of high cash distributions. Vassallo noted that they gave back roughly $1.4 billion to their limited partners (LPs) over the last three years, which is over three times what the firm called from its investors during the period.

Although Foundation Capital is sticking to its early-stage strategy, it claims it needs a larger fund because the size of seed and Series A deals has grown. The firm wants to continue to own 15% to 20% of each company when it first invests. This approach has allowed the firm to maintain its position as a leading seed stage investor.

One notable change at Foundation Capital is the retirement of Charles Moldow, an investor who spent nearly 20 years at the firm and backed companies like LendingClub, Rappi, and Kiavi. His departure has left the firm with four general partners.

In conclusion, Foundation Capital's successful raise of its eleventh flagship fund is a testament to the firm's unwavering commitment to seed stage investing. By focusing on emerging markets and identifying pre-founders, the firm has been able to create new categories and achieve exponentially better outcomes. As the venture capital landscape continues to evolve, Foundation Capital's approach is likely to remain a key driver of innovation and growth in the tech industry.