General Catalyst, one of Silicon Valley’s largest venture capital firms, is poised to raise almost $6bn in order to invest in start-ups. This shows that the sector can still attract investors despite a recent fundraising drought.
Multiple sources with knowledge of the matter claim that the 24-year-old firm, which was an early investor in Stripe, Snap, and French artificial intelligence startup Mistral, could close its latest funding as soon as next week.
General Catalyst plans to use the money for investments in various sectors, including defence, space and climate change, fintech, healthcare and healthcare, and will do so across the US, Europe, and India.
The new investment shows that limited partners (institutional investors, endowments, foundations) are willing to support the most recognizable firms, even in the face of a general fundraising crisis.
General Catalyst has been close to launching its new fund, just weeks after Andreessen Horowitz had raised $7.2bn in a series vehicles aimed at artificial intelligence (AI), infrastructure and defence. According to PitchBook, the two funds are the biggest raised since 2022.
According to PitchBook, funding for US VCs is down by more than half since 2022. This year, the fundraising will be the lowest in the last five years.
This has created a market with two tiers, where newer entrants struggle to survive. The head of an investment foundation in the US, which invests in a large number of VC firms said that some firms have stopped raising funds. He cited groups that entered the market since 2018. He added: “But it’s hard to think of a fund with high profile that has abandoned fundraising.”
The increase also shows that LPs will support General Catalyst’s unconventional approach. The firm has diverged more from its peers in recent years by expanding to other countries when others were retreating, and by targeting sectors that have well-established incumbents such as healthcare and education, which are traditionally shunned.
General Catalyst has declined to comment.
Hemant Taneja describes himself as a “proponent for responsible innovation”. He has also pushed for a closer collaboration between policymakers and regulators on AI, in particular.
This has led him to be at odds with Marc Andreessen, the co-founder and CEO of Andreessen Horowitz. Marc Andreessen calls for accelerating the development of powerful technologies, such as AI, in order to give America an advantage over its rivals.
Taneja has committed General Catalyst to transforming complex industries, such as healthcare. In an unusual move, General Catalyst bought a hospital in order to test new care models. Investors spread their bets among promising start-ups, hoping that one of them will become a $1bn business.
General Catalyst also expanded its international reach, while US-based companies such as Sequoia Capital or GGV Capital cut back on staff. General Catalyst has merged with European investor La Famiglia and is nearing an agreement with Indian firm Venture Highway.