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Khosla Ventures Invests $20M in AI-Powered Fund Administration Startup

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  Published in Stocks and Investing on Saturday, January 31st 2026 at 23:39 GMT by Fortune
      Locales: California, Delaware, Texas, UNITED STATES

Palo Alto, CA - February 1st, 2026 - Veteran venture capitalist Vinod Khosla, founder of Sun Microsystems and a key figure at Khosla Ventures, has signaled a significant bet on the future of private fund administration with a $20 million seed investment in Formulary. The funding, announced today, positions Formulary as a potential disruptor in a traditionally opaque and cumbersome sector.

Formulary, a relatively new entrant launched in 2025, is tackling the operational headaches faced by venture capital, private equity, and seed funds. The company provides a unified platform designed to manage critical functions including investor relations, fund accounting, and regulatory compliance. While many funds still rely on a patchwork of spreadsheets, legacy software, and manual processes, Formulary aims to offer a centralized, AI-powered solution.

The Growing Pain of Private Capital

The timing of Khosla's investment is particularly noteworthy. The private fund industry has experienced explosive growth in recent years, driven by low interest rates and investor appetite for alternative assets. This boom, however, has created significant operational burdens for fund managers. The sheer volume of capital flowing into private markets has increased the complexity of tracking investments, managing investor reporting, and ensuring compliance with ever-changing regulations.

"The private fund administration market is experiencing rapid growth and complexity, and there's a huge need for a more efficient, transparent solution," Formulary CEO Brian Schwartz explained in a 2026 interview with Fortune. "Funds are spending an increasing amount of time and resources on back-office tasks, diverting attention from core investment strategies. We're building a platform to alleviate that pressure."

AI as a Key Differentiator

Formulary isn't simply digitizing existing processes. The company is leveraging artificial intelligence (AI) to automate repetitive tasks, improve accuracy, and provide deeper insights. This includes automated investor reporting, reconciliation of fund financials, and flagging potential compliance issues. The promise of AI-driven automation is crucial, as manual processes are prone to errors and are incredibly time-consuming - costing funds significant money in operational expenses.

Industry analysts predict that AI-powered fund administration tools will become increasingly essential. "The margin for error in private fund accounting is slim," notes Sarah Chen, a senior analyst at Zenith Research. "Funds need to demonstrate meticulous record-keeping to both investors and regulators. AI can help them achieve that level of accuracy and efficiency while reducing costs."

A Market Ripe for Disruption

Formulary estimates the total addressable market for its solution to be in the tens of billions of dollars. This figure reflects the vast amount of capital managed by private funds globally and the growing demand for more efficient operational tools. Traditionally, the fund administration space has been dominated by a handful of large, established players. However, these incumbents have been slow to adopt new technologies, creating an opportunity for agile startups like Formulary to gain market share.

Khosla Ventures' participation in this seed round is a strong endorsement of Formulary's vision. The firm has a track record of investing in disruptive technologies and identifying companies with the potential to transform industries. Joining Khosla Ventures in this round are Gaingels, Peterson Partners, and Quiet Capital, further validating the company's potential.

Formulary previously secured $3 million in pre-seed funding in 2024, demonstrating early investor confidence in the company's technology and business model. With this new round of funding, Formulary plans to expand its engineering team, enhance its AI capabilities, and scale its platform to serve a wider range of private funds. The company is also focused on building integrations with existing fund accounting and CRM systems, streamlining the implementation process for new clients.

The investment in Formulary underscores a broader trend within the fintech space: a shift towards specialized solutions that address the unique needs of specific industries. As private markets continue to grow in size and complexity, the demand for innovative fund administration tools will only increase. Formulary, backed by the vision of Vinod Khosla, appears well-positioned to capitalize on this opportunity.