Institutional Venture Partners said it had raised a $1 billion fund, IVP XIV, underscoring the ability of a small group of venture firms to raise outsize funds amid a broader environment of lackluster returns.
The firm specializes in late-stage venture investments, meaning companies with $20 million or more in revenue, and growth equity, meaning companies with $100 million or more in revenue. Traditional venture companies come in at much earlier stages, perhaps before a company has any revenue.
While the later-stage strategy offers less potential upside compared to some early-stage strategies, it also carries far less risk. IVP says its annual internal rate of return since 1980 is 43 percent.
IVP partners will keep investing in the firm's core areas of Internet and digital media; enterprise information technology; and mobile and communications, said partner Dennis Phelps, though he admitted those areas were increasingly combining.
"With the evolution of the technology market, it's harder to draw firm lines," he said. "There's quite a blur between those areas now."
The formula has led to investments such as file sharing service Dropbox; movie-rental service Netflix ; and microblogging service Twitter.
The fund will likely invest in a total of 25-30 companies, Phelps said, with an average initial investment of around $10 million.
While most firms raise much smaller funds, a handful of firms focus on the $1 billion-plus sector. Last quarter, Andreessen Horowitz raised $1.5 billion, the firm's largest fund to date. New Enterprise Associates is raising a fund that could reach $2.3 billion.
With the new fund, IVP has a total of $4 billion of committed capital.