VC Firm Takes Less-Is-More Approach With $450 Million Fund

Kevin Hartz, a co-founder of Eventbrite and longtime startup investor, has watched as venture capital firms unveil multibillion-dollar funds to back cash-hungry AI companies at every stage of their lifecycles. He’s taking a different approach.

A-Star, the early-stage venture firm Hartz launched with former Coatue investor Bennett Siegel, is set to announce on Tuesday that it’s raised $450 million for its third fund — its largest to date, but a far cry from the $15 billion fund that Andreessen Horowitz unveiled earlier this year.

“They’re kind of like buying in bulk,” Hartz said of his some peers in the industry. “I don’t think it’s how seed and pre-seed investing should be done.”

A-Star, which styles itself as A*, is part of a group of smaller funds betting that early-stage startup investing works best when VC firms are more selective about the companies they back, and when. “Just because we’re investors in a company doesn’t mean every single round you keep investing through the IPO,” said Siegel.

A-Star invests in 30 to 40 seed companies per fund, with an average check size of $3 million to $5 million and a target ownership of 10% or more. (If the firm’s stake reaches that threshold, it won’t invest in a competitor.) The new fund will be deployed over nearly three years.

That approach may not have sounded revolutionary a few years ago. However, a growing number of venture firms are racing to outdo one another by pumping ever larger sums into leading startups like OpenAI and Anthropic PBC, which are staying private longer and need more capital to cover surging computing costs.