BREAKING: USV Raises $900M… | Sourcery Newsletter Summary

1. Key Themes

Theme: Venture capital is scaling up to match AI-era round sizes, but deliberately stays smaller than LPs would allow

USV's largest-ever fund cycle is a response to market structure, not ambition

USV raised $900M, split between early-stage and opportunity funds, after two decades of intentionally small funds.

"Union Square Ventures has raised $900M in new funds, the largest fund cycle in the firm's 23-year history. The raise includes $500M for its early-stage Core Fund and $400M for its Opportunity Fund."

"The outcomes are bigger, the swings are bigger... and the rounds are bigger and more expensive and faster, and we are evolving our strategy to keep up with that and really be able to attack that market." - Rebecca Kaden

Fund size is an output of portfolio construction, not a vanity metric

"We don't raise funds as vanity metrics. It's not like, 'We gotta hit a billion,' or, 'We gotta hit two billion.'" - Mike Mignano

Check sizes have grown ~3x+ since USV's founding

"A typical Series A today starts at $10M, and some are $100M or more." (When the firm started, Wilson "expected to write $3M Series A checks.")

"The Series A checks in this fund will probably be $10-30M in order to do that. They don't have to be the whole round, so the rounds could be bigger than that." - Rebecca Kaden

Theme: AI today resembles the 2003 internet: infrastructure exists, defining applications don't yet

Fred Wilson's historical analogy anchors USV's whole strategy

"The infrastructure was there. We had Google, we had Amazon, we had Yahoo, we had eBay, but we didn't yet have Facebook, we didn't yet have Twitter, we didn't yet have YouTube, we didn't yet have iPhone." -- Fred Wilson

"Obliterate, don't automate": replace markets rather than make them incrementally efficient

"Don't hire a lawyer, use an AI lawyer. Don't hire an accountant, use an AI accountant. Don't hire a doctor, use an AI doctor." - Fred Wilson

Evidence from inside USV: "Fred Wilson said 20% to 30% of USV's legal work, including term sheets, no longer involves a human lawyer." Doctronic, an AI doctor that can write prescriptions in some states, is cited as a portfolio example.

Theme: Building AI is cheap, but scaling AI companies is expensive, which changes the venture math

Compute is a new, large cost line, and free tiers from labs cap startup pricing

"If you look at the fundamental cost that companies are spending on compute, it's in a totally different hemisphere than it's ever been." - Rebecca Kaden

"A startup can't come in and charge for something that their competitor is giving for free." -- Fred Wilson

Today's round progression looks like Twitter's, multiplied by 10

Twitter's financing went $5M, then $25M a year later, then $100M the year after. "Multiplied by 10, that sequence is $50M, $250M, and $1B, which matches the round sizes in AI today."

Theme: Retention and engagement matter more than ARR in AI apps

Subscriptions can mask weak product-market fit

"I think it's easier than ever before to get somebody to pay for a product via subscription without knowing if they actually like that product." - Mike Mignano

"Trial behavior is at an absolute high and engagement behavior is at an absolute low." - Rebecca Kaden

Revenue can hold "for 1 to 3 years while usage declines." USV tracks daily/weekly/monthly return rates and first-month churn, and uses proxies like shipping velocity when cohort data is unavailable at seed or Series A.

Theme: The "Rebel Alliance": open source infrastructure and personal agents as a counterweight to closed platforms

Developers are moving off closed stacks to open harnesses and cheaper open models

Fred Wilson said the Coinbase CTO described moving its coding agent harness off Claude onto Pi, an open source harness from USV portfolio company Earendil, "and that Shopify has done the same."

The Sourcery tweet quoted in the piece makes the economic case: "My guess is that within 12-18 months, 80% of our workloads will be going toward models that are 99% cheaper... Open source models are 3-6 months behind the frontier models, but they're 99% cheaper."

Consumers will want their own agents, which creates security and platform-conflict issues

"We do believe that people will want their own agents that represent them as opposed to my Amazon, only having my Amazon agent." - Fred Wilson

"If you give your agent access to your email, which is where all your password reset emails go, they just automatically will be able to access literally every account you own." - Mike Mignano

Theme: Energy is the cleanest way to bet on AI

"If you really want just a simple way to bet on AI, and not have to think about all this other stuff, just bet on energy." - Fred Wilson

Energy is "20% to 30% of the portfolio," and USV's dedicated energy fund (started 2021) now merges into the Core Fund.

2. Contrarian Perspectives

Staying smaller than LPs want, and not needing trillion-dollar outcomes

While the industry chases mega-funds, USV deliberately left capital on the table. The partners argue smaller funds are easier to return, allow selectivity, and keep incentives tied to portfolio performance.

"I was a little surprised how many of them said, 'Are you sure you shouldn't raise more?'" -- Rebecca Kaden

"If our biggest winners are in the single digit billions, given our fund size and our ownership, we can produce really, really healthy returns for our partners." -- Fred Wilson

Evidence: "Several of USV's largest winners have exited in the $10B range, with a few outliers at $50B to $100B." And "Every USV early stage fund has produced 2 to 3 standout companies."

ARR may be a misleading metric in the AI era

Against the consensus that ARR growth is the key startup scorecard, USV argues pay-first annual subscriptions can inflate revenue while real usage decays.

"I think it's easier than ever before to get somebody to pay for a product via subscription without knowing if they actually like that product." - Mike Mignano

Free incumbents constrain startup pricing, and the winners may be decided early by narrative

Rather than assuming the best product wins, Kaden argues the market crowns winners before fundamentals justify it, making founder storytelling a core diligence criterion.

"Markets now designate category winners well before the business reflects it." (paraphrase of Rebecca Kaden; the article notes this alongside USV's diligence focus on "recruiting ability, speed of decision making, and control of the market narrative.")

3. Companies Identified

Union Square Ventures (USV): NYC-based early-stage VC founded 2003. Subject of the piece; raised $900M. Quote: "Union Square Ventures has raised $900M in new funds, the largest fund cycle in the firm's 23-year history."

Supertake: USV-incubated AI investing product. Why mentioned: first incubation released; turns an investing thesis into a portfolio and can route trades through a user's brokerage. Quote: "The agent invests through Robinhood or Coinbase accounts, monitors news on the positions, and rebalances automatically."

Doctronic: AI doctor. Why mentioned: example of "obliterate, don't automate." Quote: "Doctronic is one example, an AI doctor that can write prescriptions in some states."

Radiant: Nuclear microreactor company, USV investment from 2021. Why mentioned: energy thesis. Quote: "Radiant raised more than $300M about 6 months after its $165M Series C to mass-produce Kaleidos, a 1MW microreactor."

Earendil (Pi): Open source agent harness company. Why mentioned: poster child for the Rebel Alliance. Quote: "Earendil, founded by Flask creator Armin Ronacher, acquired Pi from its author Mario Zechner on April 8. Pi's GitHub repository showed 54.5k stars and 209 contributors as of May 2026."

Coinbase: USV portfolio company; Wilson sits on the board. Why mentioned: trust/security brand model and the open harness shift. Quote: "Coinbase, where he remains on the board, built its brand on cold storage, two-factor authentication, and delayed withdrawals."

Abridge: Medical AI scribe, 2016 fund company. Why mentioned: non-linear path. Quote: "Abridge... started as a consumer product for patients to record doctor's appointments. The company moved to selling to physicians."

Duolingo: Why mentioned: pivot case study. Quote: "Duolingo's first product translated foreign language documents."

Indeed: Why mentioned: early USV win from first fund. Quote: "Indeed started with 2 founders and a few engineers and is now one of the largest hiring platforms in the world."

Twitter: Why mentioned: early USV investment and funding-pattern analogy. Quote: "Twitter's original financing was $5M, followed by $25M a year later and $100M the year after."

Common Fabric: USV portfolio company. Why mentioned: agent security. Quote: "USV portfolio company Common Fabric builds a sandbox for agent permissions."

Amazon: Why mentioned: platform blocking third-party agents. Quote: "Amazon recently blocked Muse from accessing its site."

Suno / Granola: Mignano's earlier Lightspeed investments. Quote: "...later was a Partner at Lightspeed, where he led early investments in Granola and Suno."

Other USV winners: Etsy, Stripe, MongoDB, Twilio. Quote: "USV was early to Twitter, Coinbase, Stripe, MongoDB, Twilio, Etsy, Duolingo and Abridge."

Shopify: Why mentioned: also moved off Claude harness. Quote: "...and that Shopify has done the same."

UTIMCO: USV's anchor first-fund LP. Quote: "UTIMCO reported a 13.8x return on that first fund and a blended 9.1x across 7 USV funds."

4. People Identified

Fred Wilson: USV co-founder and GP. Why mentioned: primary strategic voice on AI-as-2003, obliterate-don't-automate, energy. Quote: "Don't hire a lawyer, use an AI lawyer."

Rebecca Kaden: GP, joined 2017 from Maveron, first female partner. Why mentioned: market structure, compute costs, retention, multiplayer network effects. Quote: "Trial behavior is at an absolute high and engagement behavior is at an absolute low."

Michael (Mike) Mignano: GP, Anchor cofounder (acquired by Spotify 2019), ex-Lightspeed. Why mentioned: ARR skepticism, Supertake, agent security. Quote: "We don't raise funds as vanity metrics."

Nick Grossman: GP, promoted 2019, focus on cryptonetworks. Quote: "Together with General Partner Nick Grossman, they're leading USV into its next chapter."

Brad Burnham: USV co-founder. Quote: "More than 20 years after Fred Wilson and Brad Burnham laid out the firm's original internet thesis..."

Jared Hecht: Venture Partner, cofounder of GroupMe and Fundera. Quote: "Jared Hecht, Scott Belsky, and Mike Mignano lead much of this work given their operating backgrounds."

Scott Belsky: Product Advisory Partner, Behance cofounder, former Adobe CPO. Same quote as above.

Armin Ronacher: Flask creator, founder of Earendil. Quote: "Earendil, founded by Flask creator Armin Ronacher, acquired Pi from its author Mario Zechner."

Mario Zechner: Original author of Pi. Same quote as above.

Nikhil Raman: Core investment team member. Quote: "The core investment team is Fred Wilson, Rebecca Kaden, Nick Grossman, Mike Mignano, and Nikhil Raman."

5. Operating Insights

Judge AI products by engagement cohorts, not ARR

Track return frequency and first-month churn; combine hands-on product use with cohort data and look for agreement. Early on, use shipping velocity as a proxy.

"USV tracks how often users return, daily, weekly, or monthly, and whether they churn after the first month."

Price against the free tier, and budget compute as a core cost

Startups can't charge for what labs give away, and compute costs are far larger than before. Plan capital needs accordingly (and consider cheaper open models for most workloads).

"A startup can't come in and charge for something that their competitor is giving for free." -- Fred Wilson

Build trust and permission controls into agent products

Agent access (especially email) is a massive security surface; trust brands can win.

"Rebecca Kaden sees a similar opening for trusted brands in AI." Wilson cites Coinbase's "cold storage, two-factor authentication, and delayed withdrawals" as the model.

6. Overlooked Insights

Proprietary seeds and incubations could be a third to half of USV's seed deals

USV develops an idea, recruits a founder, and writes the first checks itself, a meaningful shift from pure founder-led sourcing.

"I think maybe those will make up as much as a third to a half of all the seed investments we make." - Fred Wilson

Multiplayer features may be the missing network effect in AI apps, and on-device/private models could gain demand

"Rebecca Kaden also expects multiplayer features to be the source of network effects in AI applications, which USV has not yet seen at scale," and she pointed to "on-device models, private models, and biometric proof of humanity as categories that may gain demand."