Menlo Ventures' $3 billion fund: the return from Anthropic

      Menlo Ventures has successfully raised $3 billion, marking its largest fundraising effort in its 50-year history. This amount is essentially backed by a significant investment in Anthropic, which has now reached a valuation of approximately $14 billion.

      While most venture funds are sold on future potential, Menlo Ventures’ new $3 billion is based on a tangible asset. The firm disclosed the raise on Tuesday, its highest in half a century, with its investment in Anthropic serving as the primary justification, as reported by sources familiar with the situation to Bloomberg.

      Menlo first invested in Anthropic in 2023, at a time when the company had no products or revenue. Since then, it has committed around $1 billion to the AI firm, which is now valued at over $900 billion. Such returns empower the firm to raise substantial amounts of capital.

      The prominent narrative here is the dollar figure. However, the more intriguing aspect involves what this raise indicates about the venture capital landscape itself. The boom in AI is transforming the operational strategies of these firms, with Menlo exemplifying this shift.

      The $3 billion is divided into two segments. Menlo Ventures XVII handles early-stage investments, ranging from seed to Series A, while Menlo Inflection IV targets growth funding for Series B and beyond. The firm asserts that this structure allows it to support a founder from inception through to scaling.

      The presence of the second fund is significant. For the past three years, Menlo has branded itself as a contrarian early-stage investor, backing companies ahead of market validation. By introducing a growth fund, it finds itself competing alongside the largest global funds in pursuit of late-stage opportunities.

      The firm aims to position itself as a “Goldilocks” investor, involved in every funding round. However, this strategy carries the risk of transforming into the very entity it once aimed to challenge.

      Menlo is not the only firm adapting to changes; AI startups are increasingly remaining private for extended periods, as seen with Anthropic and Databricks securing Series H and L funding rounds instead of pursuing public offerings. This trend locks in the most significant returns in late-stage funding, prompting early investors to add growth funds to maintain their participation. Even Benchmark, traditionally focused on early-stage investments, has recently established its first growth fund after 30 years.

      Menlo’s actions reflect a broader trend rather than a unique occurrence.

      The lucrative investment in Anthropic was neither inexpensive nor uneventful. In 2024, Menlo led a $750 million Series D round for Anthropic, marking its largest investment to date. This funding round quadrupled the startup's valuation to $18.4 billion.

      The structure of the deal was unconventional; Menlo utilized approximately $500 million through a special-purpose vehicle, alongside an additional $250 million from its own resources and firm insiders. Managing partner Shawn Carolan referred to this as a “bet-the-firm moment,” and it has since become a model for future investments.

      Special-purpose vehicles focused on AI have proliferated, to the extent that Anthropic has cautioned about unauthorized entities posing as legitimate vehicles.

      Menlo has extended its efforts beyond the investment table; in July 2024, it launched the $100 million Anthology Fund in collaboration with Anthropic to support startups leveraging its technology. This fund has since invested around $250 million across over 60 companies, including successful exits like Graphite, acquired by Cursor, and Astrix Security, bought by Cisco. In essence, the Anthology Fund acts as an early-detection system, revealing where AI innovations are taking hold before they achieve widespread recognition.

      Currently, Menlo approaches its investments with increased confidence. Over the past year, it has invested $100 million each in Lovable, a Swedish coding startup valued at $6.6 billion, the music generator Suno, and the voice-to-text company Wispr. Additionally, it has allocated $50 million for investments in new research labs, including Flapping Airplanes, which had an initial valuation of $1.5 billion.

      Managing partner Matt Murphy, who led the Anthropic investment, clearly articulated the firm’s newfound aggressiveness: “Now we’re just fierce,” he stated. “Let’s get after it.”

      The landscape into which Menlo is raising funds differs significantly from 2023. Kleiner Perkins secured $3.5 billion across two AI-focused funds in March. Andreessen Horowitz raised over $15 billion in early 2026, amounting to more than 18% of all U.S. venture capital raised the previous year. Sequoia acquired around $7 billion for its expansion fund. With $3 billion, Menlo is not prioritizing size.

      Instead, it aims for strategic positioning. “Strong portfolios attract strong founders,” remarked partner Venky Ganesan. The firm argues that close proximity to defining companies provides an advantage that capital alone cannot offer. Each founder that Menlo invests in, it claims, enhances the network