Investors have long invested in other investors as a way to gain exposure through smaller, faster, more ambitious funds, and access big deals before their competitors catch on. Andreessen Horowitz has been doing it for years, most recently investing in an art fund with NFT, and same with Lightspeed and Sequoia, they now have well-known exploration programs providing seed capital to ambitious emerging investors.
While the fund of funds is not a new strategy, it is one that is gaining significant traction in a weakening late-stage market and a race to back the best pre-seed companies out there. Recent efforts by Tiger Global Management and Seven Seven Six, the venture capital firm of Alexis Ohanian and Katelin Holloway, show how much attention is being directed at emerging fund managers.
To begin with, The Information reported that the hedge fund Tiger Global Management allocated $XNUMX billion for early-stage tech funding. The fund has already backed firms like Better Tomorrow Ventures, which raised a $225 million fund, Moxie Ventures, that appeared with 85 million for Fund II and Chapter One Ventures, which recently launched an accelerator program starting with a $40 million fundraising.
Days later, 776 announced Titans Fund, an investment vehicle and accelerator that hopes to help emerging fund managers start their own independent investment firms. The fund, in addition to providing trigger capital, wants to help aspiring investors with advice on how to actually execute on their thesis. Investors will also have access to Cerebro, 776's software tool that connects portfolio companies to a searchable database of more than 40,000 contacts.
The direct line between Tiger Global and 776 is that both investment firms want early-stage exposure and, rather than doing it themselves, can lean on experimental investors to reduce risk and even lead those early checks. Sure enough, just a few months ago, Bain Capital announced a $1.3 billion fund to back younger companies and startups, helping the company support diverse founders and giving its existing limited partners new opportunities to seed.
The growth of the fund of funds taps into another growing trend: interest in codifying the investment world. In the past, there was an informal "handshake" to co-invest and pass on the flow of business. Now, in a world where market researchers can simply start a rolling fund and emerging managers can lean on the community to win deals, companies need to put money where the common ground for collaboration is.
