I talked to General Catalyst CEO and managing director Hemant Taneja in the dark.
Well, he didn’t know that, but by now he probably does. The news broke yesterday morning that General Catalyst (GC for short) had raised about $8 billion in new capital. I was up at 6 AM my time, got on the phone with Taneja around 7:20 AM, and about halfway through our conversation, I realized I’d completely forgotten to…turn on the light.
Taneja—whose investments include Stripe, Samsara, Canva, Anduril, and Gusto—walked me through how that $8 billion-ish number breaks down: $4.5 billion approximately is geared towards the firm’s VC funds, including seed and growth equity. From there, $1.5 billion is for GC’s "creation" strategy, plus another $2 billion is geared towards "separately managed accounts." It’s GC’s 12th set of funds. I asked Taneja outright: To what extent is General Catalyst a VC firm, and to what extent is it becoming something else?
"So, we describe ourselves as a global investment and transformation company," Taneja told Fortune. "Our core very much is early-stage venture capital…It gives us license to then think about transforming industries. That's where we've been cultivating these ecosystems of founders and companies we're working with—and then developing innovative partnerships with industry and policy to drive transformations. I think you've seen a lot about our work in health. We're starting to do that work in many other industries broadly."
That answer—I think—translates to something along the lines of "we do venture capital, but are not precisely a venture capital firm." It’s unsurprising, given that Taneja has previously (and publicly) expressed his views on the limitations of the traditional venture capital model. Accordingly, much of what Taneja and I discussed as I sat in my flannel in the dark wasn’t what you’d term standard VC. We talked about the firm’s headline-grabbing healthcare strategy. (Taneja confirmed that GC’s acquisition of Akron, Ohio-based health system Summa Health, announced in January, hasn’t yet closed.) What might it mean to bring that sort of all-in strategy to other sectors?
"We are actively working through that," said Taneja. "What does that mean for doing it in defense? What does that mean for doing it in manufacturing? You probably saw that we invested in rebuilding manufacturing in the U.S. We're thinking about manufacturing from a global perspective, in all of our geographies where we focus, and we're thinking about that in other industries, as well. So, our whole idea is to bring resiliency to these critical industries."
The $1.5 billion for "creation" strategies will focus heavily on AI. Taneja sees venture capital as "very serendipitous," whereas creation is more "intentional" and involves "catalyzing projects." GC decided it needed to lean into "applied AI" opportunities right now, and "that's why we scaled that fund quite a bit this time around." (GC may be an investor in France-based Mistral AI, but my personal favorite GC investment right now is Bird Buddy, a smart bird feeder company that utilizes AI.)
Taneja is interested in opportunities around onshoring AI productivity to reverse offshoring trends, and is looking at areas like call centers, legal, and accounting as he tracks AI-fueled “workforce transformation.” And as GC scaled up its creation strategy, the firm also scaled up its separately managed account (SMA) strategy this time around.
Taneja told Fortune that some of GC’s larger LPs are interested in SMAs as they want to "curate their exposure" to long-term transformational technologies, including AI. I asked Taneja: How are the LPs feeling? He said that LPs see potential for "really high and really excellent returns" and suggested there’s comfort with GC’s patient approach. But yes, liquidity is a topic of conversation, and Taneja turns to startups themselves.
"That's definitely top of mind…and we've been putting these processes in place," he said. "We developed this product called the customer value strategy, which provides a pathway to liquidity for companies." This strategy, broadly, is to finance customer acquisition costs (CAC) like an asset, freeing up cash for companies to grow without relying on dilutive equity financing. As companies stay private longer, the idea is to generate liquidity for businesses without needing IPOs or acquisitions. (The customer value strategy is not specific to this new set of funds and is allocated through a separate pool of capital.)
"Our industry needs to mature as our opportunity is maturing, with the financial apparatus that we have to build these companies and generate liquidity," said Taneja. "That’s, to me, the bottom line."
After all, at the end of the day, it’s about keeping the lights on—for startups and the firms that back them. Taneja hung up, I glanced around, and turned on my own light.
Blue skies (maybe) ahead…Bluesky has raised a $15 million Series A led by Blockchain Capital, with participation from Alumni Ventures, True Ventures, and SevenX, among others. Bluesky—known as a challenger to Elon Musk’s Artist Formerly Known as Twitter, X—said it surpassed 13 million users. For the sake of a little fun, a moment of time travel: Twitter raised a $15 million Series B way back in 2008. The company didn’t disclose user numbers at the time, but by August 2009 reports pegged Twitter users at about 23.5 million. So, after all these years and headaches, the value of a microblogging service is more or less…the same?
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See you Monday,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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