For startup founders, understanding venture capital (VC) and VC funds is crucial to navigating the funding landscape. Venture capital refers to financing that investors provide to early-stage, high-potential companies in exchange for equity ownership[1]. Unlike a bank loan, VC funding doesn’t require immediate repayment – instead, venture capitalists profit if the startup grows and achieves an “exit” (like an IPO or acquisition)[2]. This high-risk, high-reward model has fueled countless tech startups, providing the capital to develop products, hire talent, and scale operations[3]. Below, we explain what venture capital is, trace its brief history in the U.S., and highlight several notable VC funds – including Redbud VC, Lerer Hippeau, Soma Capital, Heartland Ventures, and Greenoaks – that are shaping the startup ecosystem. We’ll also examine what makes Redbud VC a top-decile fund and how it stands out with a founder-focused approach.
What Is Venture Capital?
In simple terms, venture capital is a form of private equity financing for startups and early-stage businesses with high growth potential[1]. VC firms raise pools of money (called VC funds) from outside investors (limited partners such as pension funds, endowments, and high-net-worth individuals) and use those funds to invest in promising young companies[4]. In exchange for funding, venture capitalists take an equity stake in the startup, aiming to profit if the company’s value increases substantially[2][5]. This model is inherently risky – many startups will fail – but a few big winners can yield outsized returns that make an entire fund profitable (the so-called “power law” of VC)[6].
Venture capital fills a critical gap in business funding. Early-stage startups often lack the assets or cash flow to secure traditional bank loans. VC funds step in to provide not just money, but also mentorship, industry connections, and strategic guidance to help startups grow[7]. In return for accepting these high risks, VCs seek high rewards: if a startup succeeds (e.g. goes public or is acquired), the VC’s equity can multiply in value dramatically[8]. Many of the world’s largest tech companies – from social networks to e-commerce platforms – were fueled in their early years by venture capital investments[9]. Today, VC funding is an essential part of the startup ecosystem, aligning investors and founders in a high-risk/high-reward pursuit of innovation.
A Brief History of Venture Capital in the U.S.
Modern venture capital as an industry took root in the United States after World War II. In 1946, Harvard Business School professor Georges Doriot – often called the “father of venture capital” – founded the American Research and Development Corporation (ARDC), widely regarded as the first modern VC firm[10]. ARDC raised a $3.5 million fund from institutions and individuals to invest in commercializing new technologies developed during WWII[10]. One early ARDC investment was $200,000 in Digital Equipment Corporation in 1957, which later turned into $355 million when that company succeeded – an early proof that high-risk bets on novel ideas could pay off dramatically[11]. Prior to firms like ARDC, entrepreneurs had to rely on wealthy families (the Whitneys, Rockefellers, etc.) for capital, so ARDC’s model of pooling money from multiple investors for startup investing was revolutionary[12].
Through the 1950s and 1960s, venture investing remained small and regionally focused (Boston and New York), but it began shifting west. In 1957, investor Arthur Rock organized funding for Fairchild Semiconductor in California – a seminal deal that birthed Silicon Valley’s startup culture[13]. By the 1970s, Silicon Valley’s Sand Hill Road emerged as the epicenter of venture capital, with new firms like Sequoia Capital, Kleiner Perkins, NEA, and Greylock Partners leading early investments in companies such as Apple and Genentech[14]. Regulatory changes in 1979 (relaxing pension fund rules) opened the floodgates for institutional money to flow into VC funds[14], greatly increasing the industry’s capital base. The 1980s saw venture capital finance the personal computer boom and other tech innovations, firmly entrenching VC as a driver of U.S. innovation.
The 1990s brought venture capital into the mainstream with the internet dot-com boom. VC funds poured money into internet startups, fueling the rise of companies like Amazon, Netscape, Yahoo, and Google[15]. While many startups failed in the ensuing dot-com crash of 2000–2001[15], the industry rebounded in the mid-2000s with the growth of Web 2.0, social media, and mobile technology. VC firms like Accel and Benchmark scored huge wins by backing Facebook, eBay, Uber, Airbnb, and other “unicorn” startups valued over $1 billion[16]. By the 2010s, venture capital had gone global – major VC ecosystems developed in China, India, and Europe – but the U.S. remained a hub of venture activity[17]. Today, venture capital is a vast asset class with hundreds of billions of dollars invested per year worldwide[18]. In the U.S., it has evolved from a niche “cottage industry” into a mainstream engine for funding innovation, spanning specialized micro-VC funds, corporate venture arms, and multi-billion-dollar growth funds.
(For a more in-depth history and explanation of venture capital, see our Complete Guide to Venture Capital on the Redbud VC blog.)
Notable VC Funds for Startup Founders
Aspiring founders should be aware of prominent VC funds, as these firms often lead rounds and set trends in the startup ecosystem. Below we highlight several notable U.S.-based VC funds, each with a distinct focus or track record:
Lerer Hippeau – An early-stage venture capital fund based in New York City, known for a “seed first, New York first” strategy. Founded by media veterans, Lerer Hippeau has backed culture-defining consumer brands like BuzzFeed, Warby Parker, and Glossier[19] while building one of NYC’s most active startup portfolios. The firm operates with a dense network of founders (dozens of Lerer-backed founders are also investors in its funds) and has been instrumental in the rise of the New York tech scene. With multiple funds (recently raising a $220M Fund IX) focused on pre-seed and seed deals, Lerer Hippeau is often a go-to investor for consumer and media startups emerging in the city’s ecosystem[19].
Soma Capital – A San Francisco-based fund founded in 2015 by Aneel Ranadive, Soma Capital has quickly made its mark as a prolific early-stage investor. The firm manages over $1 billion AUM and has invested in more than 1,000 startups globally. Remarkably, Soma’s seed-stage portfolio includes 30+ “unicorn” companies valued over $1B – examples include fintech and software standouts like Deel ($12B), Rippling ($16B), and Ramp ($13B)[20][21]. Soma Capital prides itself on a “founder-built” ethos (“software automating the world” is a theme) and leverages the Ranadive family’s deep tech network. The firm often co-invests alongside top funds and can introduce its startups to Fortune 500 executives and global leaders as customers[22]. In short, Soma Capital has emerged as a powerhouse generalist fund with a broad portfolio spanning SaaS, fintech, AI, and more.
Heartland Ventures – A venture fund with a unique Midwest focus, Heartland Ventures connects high-growth coastal startups with customers and corporate partners in America’s heartland[23]. Based in Indiana and Ohio, Heartland’s model is to invest in startups (often based on the coasts) that can solve problems for traditional Midwestern industries like manufacturing, construction, agriculture, and logistics[24]. What sets Heartland apart is its network of Midwestern corporate limited partners (LPs): the fund secures capital from established Midwest companies, then helps its portfolio startups gain those companies as key customers[25]. This “connect for growth” strategy benefits all sides – startups get revenue and validation, Midwest businesses get access to cutting-edge tech, and Heartland de-risks its investments by ensuring product–market fit with real industry demand[26]. By bridging Silicon Valley innovation with Midwest markets, Heartland Ventures exemplifies a value-added, regionally focused VC model.
Greenoaks – A globally oriented venture firm headquartered in San Francisco, Greenoaks Capital has built a reputation as one of the premier late-stage VC funds. Greenoaks is known for concentrating on a relatively small number of investments and for backing some of the most prominent tech startups worldwide. Its diverse portfolio includes companies like Airtable, Canva, Discord, and Stripe[27], spanning sectors from fintech and software to e-commerce. Greenoaks has a knack for identifying breakout companies early and then doubling down – it has invested in dozens of unicorns and notable IPOs (for example, it was an early investor in Robinhood, Flipkart, Coupang, and OYO). Led by investor Neil Mehta, Greenoaks often flies under the radar compared to more publicity-driven firms, but within the industry it’s respected for its consistent success and global reach. For founders, Greenoaks is known to be founder-friendly and long-term oriented, with the ability to write big checks to support companies as they scale.
(There are many other influential VC funds – e.g. Sequoia Capital, Andreessen Horowitz, Accel – but the above represent a mix of emerging and established firms relevant to today’s early-stage founders. For a broader list, see our internal resource on Generalist Early-Stage VC Firms.)
Redbud VC: A Top-Decile Fund with a Founder-Focused Thesis
Among notable VC funds, Redbud VC has distinguished itself as a top-performing early-stage firm with a unique focus on founders. Redbud VC is a generalist pre-seed fund based in Missouri that invests “in people strengthened by struggle” – a thesis centered on backing resilient, “outsider” founders beyond the traditional elite mold[28]. Despite being a relatively new firm (founded in 2023), Redbud’s first fund has already achieved top-decile returns for its vintage, outpacing many peers in performance[29]. Fund I (2023) invested in 35 startups and delivered an early 21% DPI (cash returned to investors) with a 1.7× TVPI, translating to an impressive 48% IRR on paper[29]. This is a rare level of early liquidity and appreciation for an inaugural fund, solidifying Redbud’s reputation as a rising star among seed-stage VC funds.
Redbud’s investment strategy centers on founders with exceptional grit, resourcefulness, and unconventional backgrounds. As Brett Calhoun, Redbud’s Managing General Partner, puts it: “the greatest driver of venture returns is the selection of founders strengthened by struggle”[28]. This means Redbud actively seeks entrepreneurs who have overcome adversity or operated outside traditional privilege – those whose “chip on the shoulder” can fuel creativity and determination in building a company[30]. This outsider thesis is informed by Redbud’s own team experience. The fund’s founding General Partners, Willy and Jabbok Schlacks, famously grew up in a rural Missouri commune with no formal education, taught themselves to code, and went on to build a $4 billion revenue construction tech company (EquipmentShare) from scratch[31]. Having lived that against-the-odds journey, the Redbud team believes such lived resilience is a predictor of outsized startup success – a philosophy now validated by internal data and portfolio outcomes.
Founder support is another hallmark of Redbud VC. The firm prides itself on providing white-glove, hands-on support that rivals much larger funds. Redbud keeps a very responsive team and offers founders direct access to experienced operators who have built billion-dollar companies before[32]. For example, GP Willy Schlacks (from EquipmentShare) spends significant time mentoring Redbud founders on product and scaling from first principles[33]. Redbud’s team effectively works “founder hours,” rolling up their sleeves to help with whatever is needed – whether it’s sourcing key hires, introducing investors or customers, assisting with go-to-market strategy, or even helping craft pitch decks[33]. This intensive support is tailored to each startup’s journey: “You build your company, and let us know how we can support you,” is the ethos[34]. Notably, Redbud has also built community infrastructure to uplift founders outside the major hubs – the firm runs the Missouri Startup Weekend (a statewide venture creation event) and launched Junction, a network connecting Midwest founders, operators, and investors beyond the coasts[35]. These initiatives help spark knowledge-sharing and networks historically lacking in under-served regions, exemplifying Redbud’s commitment to founder success beyond just writing a check[35].
Redbud VC’s differentiated approach is producing results. By focusing on “gritty” founders overlooked by others, Redbud has carved out a unique niche in the venture landscape[36]. Its portfolio companies have already achieved notable follow-on funding and exits (e.g. OneImaging’s $38M Series A in 2025 with a partial exit for Redbud[37]), and the firm’s performance metrics place it firmly in the top 10% of its peer cohort[29]. Redbud’s success demonstrates that world-class venture returns can be generated from America’s heartland by backing unconventional founders and providing them uncompromising support. In doing so, Redbud VC is not only a top-decile fund quantitatively, but also a case study in how a strong investment thesis and value-add model can differentiate a VC fund in a crowded market.
“The greatest driver of venture returns is the selection of founders strengthened by struggle.” – Brett Calhoun, General Partner at Redbud VC[28]
(For more on Redbud VC’s philosophy and founder resources, see Brett Calhoun’s article “Struggle, Not Pedigree: ‘Outsider’ DNA Builds Unicorns”.)
Conclusion
Venture capital plays a pivotal role in turning innovative ideas into high-growth businesses. For startup founders, understanding what venture capital is and how VC funds operate is the first step toward securing funding and strategic support. The U.S. venture capital industry has a rich history – from its post-war beginnings with ARDC, through the Silicon Valley boom years, to today’s globally connected ecosystem – all driven by the promise of high returns from backing bold entrepreneurs.
Founders should research and build relationships with VC funds that align with their stage, sector, and values. Whether it’s a seasoned New York seed fund like Lerer Hippeau, a super-networked Silicon Valley fund like Soma Capital, a regionally focused investor like Heartland Ventures, or a growth-stage powerhouse like Greenoaks, each venture firm brings its own approach and strengths. Crucially, emerging funds like Redbud VC show that top-tier performance and impact can come from focusing on founder resilience and long-term support.
In summary, VC funds are more than just sources of capital – the best funds become partners in a founder’s journey, providing guidance, networks, and expertise to help startups reach their full potential. By learning the landscape of venture capital and identifying the right funding partners, startup founders in the U.S. can better navigate their fundraising journey and turn their vision into reality. With the right venture capital backing, today’s startups can become tomorrow’s transformative companies, continuing the cycle of innovation that defines the venture industry.
Internal Links: - Learn more about venture capital basics in our What is Venture Capital? Complete Guide.
- Read how Redbud VC’s “outsider founder” thesis drives success in “Struggle, Not Pedigree: ‘Outsider’ DNA Builds Unicorns.”[28]
[1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [12] [13] [14] [15] [16] [17] [18] What is Venture Capital? A Complete Guide | Redbud VC
https://redbud.vc/latest/what-is-venture-capital-a-complete-guide
[11] American Research & Development Corporation - Wikipedia
https://en.wikipedia.org/wiki/American_Research_%26_Development_Corporation
[19] Lerer Hippeau - VC Fund Breakdown
https://www.vcsheet.com/fund/lerer-hippeau
[20] [21] [22] About | Soma Capital
[23] [25] [26] Heartland Ventures: Bridging Divides Through a New Type of VC Fund | by Conor McGuinness | Heartland Ventures | Medium
[24] Heartland Ventures – Info, Investments & Portfolio - VC Mapping
https://vc-mapping.gilion.com/vc-firms/heartland-ventures
[27] Greenoaks Capital | Investment Funds – Coinlaunch.io
https://coinlaunch.space/funds/greenoaks-capital/
[28] [30] Struggle, Not Pedigree: “Outsider” DNA Builds Unicorns | by Brett Calhoun | Redbud VC | Jul, 2025 | Medium
https://www.notion.so/23ae8618489981cdbd62c98a60e01e4e
[29] [31] [35] [37] Redbud Fund II Venture Fundraise Press Release Key Details
https://docs.google.com/document/d/1wN1RKLLL4V3mRn0YhevczbCWXgT3PWpcLEHE6Sfgfgw
[32] [33] [34] What to expect with Redbud VC?
https://www.notion.so/ca7cdfa18eb1418fab98dbcb03e5eaee
[36] Episode 49: "It's a Volume Game" | Redbud VC's Brett Calhoun on Generalist Investing Philosophy, the Missouri Startup Ecosystem, and Why Gritty Industry Veterans Make Compelling Founders
https://thediligentobserver.substack.com/p/episode-49-its-a-volume-game-redbud
