Constance Freedman has raised a $230 million third fund at Chicago-based venture-capital firm Moderne Ventures.

Freedman is one of a handful of women leading venture funds in Chicago (or anywhere else, for that matter) and one of the earliest. PitchBook estimates women make up the majority of decision-makers at just 11% of venture firms.

Rarer still is raising a third fund. It gets harder to raise each successive fund. Moderne’s first fund in 2015 was $43 million. It raised $200 million in 2021.

Moderne is one of the few relatively recent Chicago-based venture funds over $200 million, including S2G, Valor Siren Ventures, Energize Capital, Jump Capital and Baird Capital. Large pools of capital are critical to a vibrant startup scene, and the number of funds over $200 million has slowly expanded.

Raising money for a venture fund — big or small — has been a tougher sell the past two years. After a reset in venture-backed valuations two years ago, exits, such as IPOs and acquisitions, have been hard to come by. Without returns coming in, it’s hard for all but the most dedicated venture investors to justify putting out more money.

The amount of venture capital raised last year was about half the recent peak set in 2021, according to PitchBook data. It’s on pace to fall further this year.

Freedman, who ran the Second Century venture fund for the National Association of Realtors before setting off to launch her own fund, says Moderne benefits from a strong base of strategic investors such as corporations.

“About 40% of the capital comes from strategic investors,” she says. “But they were harder to get because they’re having their own challenges. Almost all of them came in. Many doubled or tripled down. There's also a bunch of new financial investors.”

Among the new backers are several institutional investors, such as GCM Grosvenor, which are critical to raising larger follow-on funds.

“Constance and her partners have a strong team, a value-add strategy and a great track record,” says Michael Sacks, chairman of GCM Grosvenor.

Freedman has roots in real estate, but she says Moderne has deliberately sought deals with broader appeal.

“We look for companies that are broad, and we use our sector expertise to bring companies into verticals,” says Freedman, who leads the fund with partner Liza Benson. "What you find is any company that is dependent on a cyclical industry, they’re not going to fare well when they experience a downturn."

Moderne recently invested in Qloo, a Chicago-based startup that uses artificial intelligence to help companies understand and predict consumer preferences. Its customers include Starbucks, Netflix and PepsiCo.

“They’ve started to go into real estate and finance, and that’s where we’re helping them,” she says.

Venture-capital deployment is still depressed, down 40% from where it was two years ago, giving an advantage to those willing to invest their cash.

“I am so happy to have dry powder right now because it’s the best investor environment I’ve seen in two decades,” she said.

By John Pletz

John Pletz is a senior reporter covering technology, aviation and cannabis for Crain’s Chicago Business. He joined Crain's in 2007 and previously covered technology for the American-Statesman in Austin, Texas.