With new $400 million fund, Thrive Capital is New York’s quietest success story

October 6, 2014, 1:00 PM UTC
Facebook CEO Mark Zuckerberg in front of the Instagram logo in 2013. The social network bought Instagram, in which Thrive Capital invested, for $1 billion in 2012.
Facebook CEO Mark Zuckerberg in front of the Instagram logo in 2013. The social network bought Instagram, in which Thrive Capital invested, for $1 billion in 2012.
Photograph by David Paul Morris — Bloomberg/Getty Images

Unlike just about every venture capital firm, Thrive Capital doesn’t tweet. The firm doesn’t have a blog, and it certainly hasn’t hired an in-house journalist, as has been the trend among Silicon Valley venture capitalists lately. Thrive’s website contains just one infuriating line of text, explaining what should be obvious to any visitor: “Thrive Capital is a venture capital investment firm focused on media and internet investments.” Joshua Kushner, managing partner and founder, is extremely reluctant to discuss the firm in the media.

All of venture capital used to be this way. Many old-school investors were reluctant to have websites. No longer: because it is increasingly competitive for venture investors to get into the best deals, many see brand-building “thought leadership” activities—sitting on panels, promoting their portfolio on Twitter, blogging their ideas—as a way to generate deal flow.

For whatever reason, Thrive Capital does not. It doesn’t seem to have hurt the firm one bit. In just five years, Thrive has become known as one of New York’s top venture firms, thanks to splashy consumer Web deals like Kickstarter (crowdfunding), Warby Parker (eyewear), Harry’s (razors), Spotify (streaming music), Whisper (anonymous social network), Urban Compass (apartment hunting), and Fiftythree (creative software for mobile).

The firm’s exits include Twitch, the gaming community that recently sold to Amazon (AMZN) for $1.1 billion, and Instagram, the photo-sharing app that sold to Facebook (FB) for $1 billion, as well as GroupMe (group messaging), Makerbot (3D printing), Simple (online banking), and Hot Potato (social activity). Famously, the firm earned a 200% return on its investment in Instagram in just three days. The only notable black eyes for the firm are the its participation in the high-profile funding of Fab, an e-commerce company that has been trying to rebuild itself after laying off the vast majority of its 700 employees last year, and OnSwipe, a mobile publishing company that sold in a “regrettable outcome” in August.)

Thrive’s fund returns aren’t known, but its limited partners are clearly happy: The firm has tripled its fund size with each subsequent vehicle. Thrive Capital Partners I LP, raised in 2009, had just $10 million in commitments. The next fund, a 2011 vintage, raised $40 million. In 2012, a third fund raised $150 million.

Today the firm announces it has raised $400 million for its fourth fund from Princeton University, a previous investor, as well as Wellcome Trust and others.

The new fund signals intentions to expand far beyond the early-stage boutique investing of Thrive Capital’s earliest days. Many venture investors warn of “fund creep,” or the temptation to raise an increasingly large fund, which delivers increasingly higher fees to its managers. That’s not the case here, its founder says.

Since 2009, Thrive has been writing larger checks, often in later stage deals like that of Twitch, Warby Parker, Harry’s, and Spotify. Kushner insists the larger fund won’t change Thrive’s strategy. “We’ve always invested in early and late stage companies, this is just more capital to do it,” he says. Thrive has 13 employees, including partner Chris Paik, who led the firm’s investment in Twitch.

Thrive’s investment thesis is about “creation and destruction,” Kushner says. The “creation” part refers to companies building new forms of self-expression, communication or networking, such as Instagram, Twitch, and Whisper.

The “destruction” part is newer. It comes from Kusner’s experience with Oscar, a health insurance company he launched with Kevin Nazemi and Mario Schlosser earlier this year. Building Oscar, which aims to bring a customer-friendly Web sensibility to health insurance, has been a massive undertaking. The company has raised $150 million in venture backing, including a small piece from Thrive, with the ambition of taking on a huge market.

The experience sparked Kushner’s interest in companies aiming to do the same thing to other massive industries, such as government, education, real estate, and financial services. “There are a lot of industries that represent a large portion of the GDP that have proven business models and have yet to be transformed by technology,” he says. Under this umbrella, Thrive has backed OpenGov, a government data platform, Hightower, a mobile collaboration app for landlords and brokers, 42Floors, a commercial real estate software maker, and General Assembly, an education startup.

Since the 2008 financial crisis, New York’s tech scene has flourished, and a number of Silicon Valley firms have opened satellite offices in the city. But New York still needs Silicon Valley; many of Thrive’s biggest exits are based there. Kushner says he’s seen an increase in West Coast startups seeking out capital from New York firms like his because of the city’s roots in big business. “They view New York as the key to the rest of the world,” he says, “in terms of getting access to traditional industries and other creative outlets.”