How will Menlo use the two new funds differently?

Menlo Ventures XVII will invest primarily in seed and Series A companies, while Menlo Inflection IV will provide growth capital to startups at Series B and beyond. Together, they give the firm the flexibility to back companies from their earliest days through later funding rounds that can require hundreds of millions of dollars.

What does Murphy identify as the biggest bottleneck for AI companies building enterprise applications?

Murphy says the No. 1 bottleneck is how to take all the new code that has been written and get it into production faster, safely, and securely. This tailwind is benefiting companies like Harness (application and code security), Semgrep (code security), and Greptile (code review and testing).

What changed in Menlo's approach after the Anthropic experience?

When Menlo led Anthropic's Series D round, it was the largest investment the firm had ever made. Murphy says they learned from that success, and concentrated $100 million-plus investments in standout companies—such as Lovable and Suno—have now become "a standard part of our approach." Murphy attributes this partly to the market shift: winning AI companies are growing at unprecedented rates and earning higher private valuations, so the firm is pursuing a "barbell" strategy—much more aggressive on later-stage, high-conviction bets.

AI Business & IndustryCrunchbase News AIAug 3, 2026Aug 3, 2026, 22:01 JST6 min read

Menlo Ventures raises $3B, largest in 50-year history, to back AI startups across all stages

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Key takeaway

Menlo Ventures announced $3 billion in new capital—its largest raise in 50 years—split across two funds to invest in AI companies from seed stage through hypergrowth.
Partner Matt Murphy describes the shift from a Phase 1 market (developers simply choosing a model) to Phase 2, where companies optimize their infrastructure and spend across multiple models, creating new opportunities in software delivery and model infrastructure.
Murphy calls this "a rare land-grab moment," with infrastructure seeing the most opportunity as enterprises scramble to manage multi-model environments and keep up with compute and security demands.

3 Key Points

What happened
In June, Menlo Ventures announced $3 billion in new capital across two funds—Menlo Ventures XVII for seed and Series A companies, and Menlo Inflection IV for Series B and beyond—marking the firm's largest raise in its 50-year history. The capital will target companies across the AI market, from foundational models and infrastructure to enterprise, healthcare, and consumer applications.
Why it matters
The raise reflects how central AI has become to Menlo's strategy and signals the firm's conviction that winning AI companies need sustained capital through hypergrowth. Partner Matt Murphy notes that AI companies are staying private longer and winners emerge faster than in previous software cycles; the dual-fund structure lets Menlo back founders from formation through later rounds that can require hundreds of millions of dollars. Murphy also identifies a shift from Phase 1 (developers picking any model) to Phase 2 (companies optimizing spend and infrastructure choices in a multi-model world), creating new opportunities in infrastructure and software delivery tooling.
What to watch
Murphy describes the current moment as "a rare land-grab moment," with infrastructure seeing disproportionate opportunity as enterprises adopt multi-model approaches. He flags a key bottleneck: getting new code into production faster, safely, and securely—fueling tailwinds for companies like Harness, Semgrep, and Greptile. Menlo has also backed roughly five of what it believes are the best of approximately 60 model companies, with plans to lean into one or two as they ramp.

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In Depth

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In June, Menlo Ventures announced a $3 billion capital raise split between two new funds—Menlo Ventures XVII and Menlo Inflection IV—marking the largest single raise in the firm's 50-year history. Menlo Ventures XVII will focus on seed and Series A investments, while Menlo Inflection IV will back companies at Series B and later stages. Together, they position Menlo to follow leading companies from inception through hypergrowth, at a time when venture investors are competing with well-capitalized late-stage investors to stay close to winning founders.

Matt Murphy, a Menlo partner since 2015 who leads the firm's AI investment strategy, framed the new capital as a response to fundamental changes in how AI companies scale. "AI companies need more capital than previous generations of software companies," Murphy explained. "They're staying private for longer, and the winners are quicker to break from the pack." This dynamic is visible in Menlo's own portfolio: the firm invested in Anthropic starting in Series C, then led its Series D round—at the time, the largest investment Menlo had ever made. That experience, Murphy noted, has become "a standard part of our approach now," exemplified by recent $100 million-plus investments in companies including Lovable and Suno.

Murphy articulated a market evolution from what he termed Phase 1 to Phase 2. In Phase 1, developers selected a foundational model and built atop it. Phase 2 involves companies at scale optimizing their spending and infrastructure choices in a multi-model environment where "one size won't fit all." This shift has created tailwinds for infrastructure and optimization-focused companies: OpenRouter, Fireworks, Modal, and Gimlet are benefiting from enterprises seeking to manage multiple models efficiently. Additionally, custom models based on open-source and open-weight foundations are driving demand for compute, training environments, and sandboxes—needs that Modal and Fireworks are addressing by aggregating compute capacity across providers including Nebius and CoreWeave.

When asked about the biggest bottleneck facing founders building enterprise-grade AI applications, Murphy identified a critical gap: "The No. 1 bottleneck has been how to take all the new code that has been written and get it into production faster, safely, and securely." This constraint is fueling strong demand for software delivery platforms like Harness, code security tools like Semgrep, and code review and testing services like Greptile. Murphy emphasized that while many AI categories are overfunded and subject to speculation, "the winners of this era separate quickly, and we believe they will compound at unprecedented rates."

Menlo's broader portfolio across AI reflects this multi-layered approach. Beyond Anthropic, the firm has backed app-building platform Lovable, music-generation startup Suno, AI model marketplace OpenRouter, voice productivity company Wispr, infrastructure companies Fireworks AI and Modal, robotics startup Skild AI, and AI research company Goodfire. On foundational models specifically, Murphy revealed that of roughly 60 model companies in the market, Menlo believes it has invested in more than five of the best and expects to "lean into one or two of them as they ramp." He noted that while many model startups are raising $100 million-plus rounds, Menlo prefers to write smaller initial checks, building broad exposure across the talent pool before concentrating capital once a clear winner emerges. Murphy concluded by describing the current moment as "a rare land-grab moment"—a window in which market consolidation is happening rapidly, and capital deployed wisely could yield outsized returns as the weaker competitors fall away.

Context & Analysis

Menlo's $3 billion raise marks a pivotal moment in how the venture firm allocates capital within AI. The dual-fund structure reflects a fundamental recognition that AI companies operate under different economic pressures than prior software generations—they require sustained, often massive capital injections to maintain hypergrowth and avoid being overtaken by competitors. Murphy's emphasis on moving from Phase 1 (undifferentiated model adoption) to Phase 2 (infrastructure and cost optimization in a multi-model world) suggests that Menlo sees the era of picking a single foundational model as closed; instead, enterprises will need specialized models and the infrastructure to manage them. This view informs the firm's expanded bets on infrastructure companies like Fireworks, Modal, and OpenRouter, alongside vertical-specific models like Chai Discovery and Skild.

Murphy also reveals an internal shift in investment discipline. Despite the abundance of capital flowing into AI, he notes that "many AI categories are overfunded, and there is a huge amount of speculation." Yet Menlo has responded not by pulling back but by doubling down selectively on what it judges to be the clearest winners—a strategy validated by its early, multi-round backing of Anthropic. The firm's willingness to deploy $100 million-plus into companies like Lovable and Suno signals confidence that the winners of this cycle will compound at "unprecedented rates," justifying both the concentration of capital and the higher valuations those companies command. This approach implicitly accepts that most AI startups will not survive the consolidation Murphy predicts.

FAQ

How will Menlo use the two new funds differently?: Menlo Ventures XVII will invest primarily in seed and Series A companies, while Menlo Inflection IV will provide growth capital to startups at Series B and beyond. Together, they give the firm the flexibility to back companies from their earliest days through later funding rounds that can require hundreds of millions of dollars.
What does Murphy identify as the biggest bottleneck for AI companies building enterprise applications?: Murphy says the No. 1 bottleneck is how to take all the new code that has been written and get it into production faster, safely, and securely. This tailwind is benefiting companies like Harness (application and code security), Semgrep (code security), and Greptile (code review and testing).
What changed in Menlo's approach after the Anthropic experience?: When Menlo led Anthropic's Series D round, it was the largest investment the firm had ever made. Murphy says they learned from that success, and concentrated $100 million-plus investments in standout companies—such as Lovable and Suno—have now become "a standard part of our approach." Murphy attributes this partly to the market shift: winning AI companies are growing at unprecedented rates and earning higher private valuations, so the firm is pursuing a "barbell" strategy—much more aggressive on later-stage, high-conviction bets.

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