USV, the last one standing?

Happy Tuesday Brex Community,

When evaluating legacy venture capital firms, those with over two decades of history and exceptional returns for their limited partners (LPs), Union Square Ventures (USV) stands out as one of the last remaining holdouts maintaining a relatively small fund size.

Recently, however, Benchmark, a firm historically defined by its strict discipline regarding fund size, despite overwhelming LP demand, has reportedly begun raising upwards of $2 billion. This marks a significant strategic departure and highlights a continual shift in the industry.

The "Mega-Fund" Trend

Benchmark’s move aligns with a decade long trend of "OG" firms scaling up significantly. Industry titans like Sequoia, Accel, Kleiner Perkins (KP), General Catalyst (GC),etc have all transitioned to raising massive funds. While there are strong, valid arguments for both staying lean and scaling up, the market has proven that both strategies can be highly successful.

Contextualizing USV’s "Small" Footprint

It is worth noting that USV’s commitment to smaller funds is relative. Across their three most recent vehicles, they still raised a substantial $825 million ($275M Main Fund, $200M Climate Fund, $350M Opportunity Fund).

While significant, this total remains remarkably disciplined compared to the multibillion-dollar vehicles raised by their legacy peers.

Market Outlook and Future Liquidity

As the surface area of opportunity in the tech sector continues to expand, it is likely we will see VC fund sizes continue to grow in tandem. Looking ahead, the market is anticipating massive liquidity events from potential mega-IPOs, including:

• SpaceX, Anthropic, OpenAI, Databricks, Stripe, etc

Once these exits materialize and return capital to LPs, it will undoubtedly help established VC firms raise even more capital. Ideally, this renewed cycle of LP liquidity will also trickle down to fund the next generation of emerging managers.

Have a great week!

Shai Goldman

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