Inside Theory Ventures: Tomasz Tunguz Unveils $450M Second Fund!

Raised in a Polish military family, Tunguz shares with a chuckle that his surname traces back to Siberian roots, where his ancestors faced exile. However, it was during his time in Washington, D.C., in his early twenties, that he found himself captivated by Jack Kerouac’s On the Road. The enchanting tales of Carmel, Big Sur, and San Francisco beckoned to him like a siren song.

“With a background in machine learning, I had my sights set on Google,” Tunguz recalls. “I vividly remember my interview trip to Google, where the cafes offered free food. But the real kicker? A massive chafing dish overflowing with raspberries—limitless quantities for the taking! I couldn’t believe my eyes.”

For him, those weren’t just raspberries; they symbolized a dream—a glimpse of an extraordinary life he yearned to explore. This curiosity has been a defining trait of Tunguz, one who is perpetually fascinated by ideas and eager to put them to the test. He eventually joined Google, transitioned to a role as a venture capitalist at Redpoint, and made a name for himself by investing in successful startups like Looker and Kustomer (which were later acquired by Alphabet and Meta, respectively). In 2023, he took a bold step by launching his own firm, Theory Ventures—a fitting name that reflects his analytical approach and love for exploration. Just last year, he announced an impressive first fund, totaling $238 million, and due to high demand, he quickly followed it up by raising an astounding $450 million for his second fund!

I had the chance to chat with Tunguz about this new fund, curious about what surprised him in this inaugural year. To his astonishment, the market took some unexpected turns.

“Round sizes have skyrocketed by 42% since we launched the firm,” he noted, contrasting his initial expectations that indicated a decrease following the Federal Reserve’s rate hikes in 2022.

It’s evident that the AI boom has played a pivotal role in this shift. While he acknowledges the larger rounds, Tunguz and Theory have also embraced AI technology in their operations. They have developed internal software capable of achieving in days what would typically require a team of three or four.

Where does he see the AI revolution heading? Tunguz believes we are currently at a plateau, with significant shifts on the horizon—especially concerning major software players. “AI is about to disrupt the foundational workflows that giants like Salesforce and Zendesk are built upon, making them susceptible to fresh competition,” he explains, likening these established companies to “ossified” structures—rigid and slow to adapt to the rapid transformations that AI will usher into white-collar jobs.

“Finally, after 20 years, companies like Salesforce and Zendesk have become vulnerable,” Tunguz tells me with conviction.

His mind is always buzzing with questions about what the future may hold. He muses, “In five years, will keyboards even have letters anymore?” As voice commands become the norm, he believes typing could soon fade into obscurity.

In the venture capital arena, theories reign supreme. Tunguz understands that to make early investments, one must possess a vision for the future. Yet, he emphasizes the importance of balancing theory with practice, aiming for a state of being “mostly right” through continuous testing and refinement of ideas, akin to the scientific method.

“It’s easy to speculate about the future and miss the mark if you aren’t actively engaging with the tools, speaking to buyers, and inviting criticism into your thought process,” he advises.

What sets Tunguz apart isn’t just the theories he holds dear, but the bold and transparent way he shares them with the public. It’s a calculated risk—after all, he could be wrong or see others replicate his ideas. But through his lens, there’s a unique blend of thoughtfulness and confidence.

Stay tuned for more insights as we continue this journey into the future,

Allie Garfinkle
Twitter: @agarfinks
Email: [email protected]
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VENTURE DEALS

– Lighthouse, a London-based travel and hospitality insights platform, raised $370 million in Series C funding from KKR.

– Enveda, a Boulder-based AI-powered medicine developer from natural compounds, raised $130 million in Series C funding. Kinnevik and FPV led the round and were joined by Baillie Gifford, Premji Invest, Lingotto Innovation, and others.

– Liquid Wind, a Gothenburg, Sweden-based eFuel production facilities developer, raised €44 million ($46 million) in Series C funding. Uniper, HYCAP, and Samsung Ventures led the round and were joined by existing investor Klimatet Invest.

– OneRail, an Orlando-based omnichannel fulfillment solution provider, raised $42 million in Series C funding. Aliment Capital led the round and was joined by eGateway Capital, Florida Opportunity Fund, existing investors Arsenal Growth Equity, Piva Capital, Bullpen Capital, and others.

– TailorMed, a New York City-based end-to-end healthcare platform, raised $30 million in funding. Windham Capital Partners led the round and was joined by Citi Impact Fund, Samsung Next, BrightEdge, and others.

– Wordware, a San Francisco-based AI development full-stack operating system, raised $30 million in seed funding. Spark Capital led the round and was joined by Felicis, Y-Combinator, Day One Ventures, and angel investors.

– Aviz Networks, a San Jose-based AI-driven networking solutions provider, raised $17 million in Series A funding. Alter Venture Partners led the round and was joined by Celestica, Qualcomm Ventures, and existing investors Cisco Investments, Moment Ventures, Wistron, and Accton.

– Teleo, a Palo Alto-based heavy equipment autonomous technology developer, raised $16.2 million in Series A extensions. UP.Partners led the $9.2 million first extension round and was joined by Trousdale Ventures, existing investor F-Prime Capital, and others. UP.Partners led the second extension round and was joined by Triatomic Capital, existing investors F-Prime Capital and Trucks Venture Capital, and others.

– Aizen Therapeutics, a San Diego-based mirror peptides biotech developer, raised $13 million in seed funding. Madrona led the round and was joined by Wilson Hill and Cercano.

– Aquaria, a San Francisco-based air water infrastructure developer, raised $12 million in funding from Mistletoe, Ciri Ventures, Soma Capital, and others.

– Anomalo, a Palo Alto-based data quality platform developer, raised $10 million in a Series B extension from Smith Point Capital.

– Crown Affair, a New York City-based haircare brand, raised $9 million in Series B funding. True Beauty Ventures led the round and was joined by existing investors Selva, Sidekick, Stage 1.

– Amigo, a New York City-based digital cloning platform for service providers, raised $6.3 million in funding. General Catalyst and GSV Ventures led the round and were joined by Comma Capital, CohoVC, and angel investors.

– Kodiak Hub, a Stockholm-based supplier relationship management platform provider, raised €6 million ($6.3 million) in funding. Oxx led the round and was joined by existing investor Scandector.

– Revisto, a San Antonio-based medical, legal, and regulatory AI review solution for pharmaceutical marketing materials, raised $4 million in seed funding. LiveOak Ventures led the round and was joined by Eli Lilly, Tau Ventures, and Arkin Digital Health.

– DANNCE.AI, a Boston-based AI biomarkers platform for neurological care, raised $2.6 million in pre-seed funding. LDV Capital led the round and was joined by Glasswing Ventures, The Leo Lion Company, Duke Capital Partners, and Merck Digital Sciences Studio.

– SuperScale, a Bratislava, Slovakia-based game business analytics provider, raised $1.2 million in funding from Strecko Investments and existing investors Across Private Investments, LevelUp Ventures, Zero One Hundred, and Venture to Future Fund.

PRIVATE EQUITY

– Centerfield, a portfolio company of Platinum Equity, acquired Brainjolt, a Pasadena-based social commerce platform. Financial terms were not disclosed.

– Jones Lake Management, backed by Fort Point Capital, acquired Ponds Beautiful, a Medina, Ohio-based pond and lake management services provider.

– SolomonEdwards, a portfolio company of Renovus Capital Partners, acquired Dominion Advisory Group, a Newport Beach, Calif.-based anti-money laundering advisory and financial crime consulting firm. Financial terms were not disclosed.

EXITS

– DwyerOmega acquired Process Sensing Technologies, an Ely, England-based measurement and monitoring solutions provider for process-critical applications, from AEA Investors and Battery Ventures. Financial terms were not disclosed.

– Fremman Capital acquired a majority stake in rehaneo, a Munich-based outpatient rehabilitation service provider, from Gimv. Financial terms were not disclosed.

OTHER

– Accenture acquired Allitix, an Irvine, Calif.-based Anaplan solutions provider. Financial terms were not disclosed.

– Vercel acquired Grep, a code search engine. Financial terms were not disclosed.

– Wiz acquired Dazz, a Palo Alto-based unified security remediation provider. Financial terms were not disclosed.

FUNDS + FUNDS OF FUNDS

– Accel-KKR, a Menlo Park, Calif.-based investment firm, raised $2.2 billion for its first fund focused on secondary investments in the software industry.

– Neos Partners, a San Diego-based investment firm, raised $1.4 billion for its second fund focused on energy transition and critical infrastructure .

– Blue Bear Capital, a Jackson, Wyo.-based venture capital and growth equity firm, raised $160 million for its third fund focused on technology companies in the energy, infrastructure, and climate sectors.

PEOPLE

– Anzu Partners, a Washington, D.C.-based venture capital and private equity firm, added Hunter Brown as a principal. Previously, he was at Anduril Industries.

– H/L Ventures, a New York City-based venture capital firm, promoted Galina Ozgur to general partner.

– Welsh, Carson, Anderson & Stowe, a New York City-based private equity firm, added Bill Bowman, Bala Girisaballa, and Lawrence Miller as operating partners. Previously, Bowman was at Emburse, Girisaballa was at Vista Equity Partners, and Miller was at Wilshire.