Venture capitalist Eric Newcomer recently sparked discussion on social media, questioning the long-standing fund size strategy of prominent Silicon Valley firm Benchmark Capital in comparison to the larger capital pools managed by firms like Greenoaks and Thrive Capital. In a tweet, Newcomer stated:
"Have to wonder why Benchmark hasn't pursued the Greenoaks / Thrive strategy: small, elite team WITH a lot of cash to invest vs Benchmark small, elite team WITHOUT a lot of cash to invest one sounds more fun" This observation underscores a significant divergence in venture capital approaches within the industry.
Benchmark Capital, founded in 1995, has famously maintained a consistent fund size, with its latest fund, Benchmark 1, raising approximately $425 million. This approach aligns with the firm's philosophy that "venture capital doesn't scale," emphasizing a lean operational model and equal partnership structure. The firm has historically focused on early-stage investments, often leading the first institutional round.
In contrast, Greenoaks Capital has embraced a strategy involving substantial capital, recently securing $2.1 billion for its fifth fund and targeting $2.25 billion for its upcoming sixth fund. Greenoaks focuses on concentrated, long-term investments in technology-enabled businesses globally. This allows the firm to deploy significant capital into a select number of companies.
Thrive Capital exemplifies the trend of increasing fund sizes, having recently closed its Thrive IX funds with over $5 billion in capital. This massive raise includes $4 billion dedicated to late-stage opportunities and $1 billion for early-stage ventures, marking a substantial increase from its initial $40 million fund. Thrive's growth reflects a strategy to engage across multiple investment stages with considerable financial backing.
The differing strategies highlight an ongoing debate within the venture capital landscape regarding optimal fund size and investment flexibility. Notably, Miles Grimshaw, a former partner at Benchmark, recently returned to Thrive Capital, reportedly seeking to invest more flexibly across stages and check sizes. This move further illustrates the appeal of larger capital pools for some investors and founders alike.
While Benchmark adheres to its disciplined, smaller fund model, firms like Greenoaks and Thrive are leveraging larger funds to make more substantial and multi-stage investments. The market continues to observe which strategy will ultimately yield superior long-term returns and influence the future direction of venture capital. The discussion initiated by Newcomer points to the evolving dynamics of capital deployment in the tech ecosystem.