Chris Gonzales’ Post

Summary: General Catalyst, an influential Silicon Valley capital firm, is launching a continuation fund valued at $800 million to $1 billion. This type of fund is becoming increasingly popular among venture capitalists due to the lack of IPOs and mergers. Key takeaways: Continuation funds are becoming more common among venture capitalists as a way to generate liquidity for their limited partners despite a slow IPO and M&A market. General Catalyst's continuation fund will likely include stakes in successful startups like Stripe, Gusto, and Circle. Selling shares to secondary investors through a continuation fund allows VCs to retain future upside of the assets and is seen as more founder-friendly compared to introducing new owners. Counter arguments: Limited partners may take a hit on existing valuations and potential share price growth when selling shares to secondary investors at a discount. Continuation funds can take time to sell and may fail entirely, as seen with Tiger Global's unsuccessful attempt to sell a strip portfolio. #venturecapital #growthequity #privateequity

When to sell? Venture capital isn’t just about picking the right horses. It’s also about helping them jump over dozens of hurdles, watching them win a bunch of races — and knowing when to stop betting on them and cash in the winnings. How exactly to do that last part is a matter of some debate among Europe’s seed funds these days. Oliver Holle, managing partner of Vienna-based seed investor Speedinvest told Amy Lewin earlier this year he wished his firm had “sold more” when up rounds were bountiful. (His portfolio includes unicorns like wefox and GoStudent.) “We’d settle on selling 20 or 30% of our shares, or say ‘Let’s make sure we at least have our money back’. In hindsight, that’s not good enough,” Holle said. How do you get more value from your investment? Follow a successful #businesstransformation recipe, focus on building disruptive #digitalbusinessmodels. #designsmarterbusiness #transformyourbiz https://lnkd.in/ekuyJsv9

Seed VCs are turning to new ‘pro rata’ funds that help them compete with the big firms Alpha Partners, SignalRank and now SaaS Ventures help seed VCs pay for shares when big VCs try to price — or push — them out Lee Edwards, partner at Root VC, has a saying at his firm that “pro rata rights are earned, not given.” That may be a bit of a stretch since pro rata refers to a term that VCs put in their term sheets that gives them the right to buy more shares in a portfolio company during consequent funding rounds to maintain an ownership percentage and avoid dilution. Still, while these rights are not exactly “earned,” they can be expensive. One of the latest trends in VC investing these days are funds dedicated to helping seed VCs exercise their pro rata rights. https://lnkd.in/dRM3RvdA By Christine Hall

It is no secret that many VCs are facing pressure from their LPs to return capital as LPs have become overallocated to private assets in recent years. The problem is exits are few and far between in the current market with already-low counts of M&A transactions dropping by about 6.5 percent, IPOs dropping by nearly 40 percent and SPAC deals dropping by one-third from Q4 2023 to Q1 2024, according to data from CB Insights. That's why Dan Engel told me he "decided to get creative." His firm Santa Barbara Venture Partners closed out Q1 2024 with four exits from its vintage 2020 debut fund, three of which happened in the span of just four weeks. Engel leveraged the secondary market, a long-stigmatized strategy, to achieve gross IRRs of 33 percent and 44 percent on partial sales of his firm's stakes in two companies. He told me that the strategy has been supported by other GPs in the industry, albeit quietly. "I really don't get why other VCs aren't doing the same. It's a strategy that some are quietly agreeing makes a lot of sense, but they aren't going to get loud about it because it will make them look bad." Read more on Venture Capital Journal. #venturecapital #secondaries

💵📊 Avid Ventures has launched its second early-stage fund closing $87 million. This brings the total capital raised by the company to over $165 million. The Avid Fund II will back exceptional founders building transformative software and fintech companies from Seed to Series B stages. 📈 The VC firm welcomed new institutional investors, including The Mellon Foundation, Hall Capital Partners LLC, Vintage Investment Partners, UJA-Federation of New York, Soka University of America, and CM Wealth Advisors, among others. Returning Fund I investors include Foundry, General Catalyst, and multi-billion dollar philanthropic family offices. It was also backed by leading investors and executives such as Brian Singerman (Partner, Founders Fund), Rob Hayes (Partner, First Round), and Susan Sobbott (former multi-decade American Express leader). 🤖 Read more here: https://shorturl.at/PExRv Addie Lerner Daniel Simon Nicky Goulimis #tech #funding #news #VC #technology #investment #innovation

The gold rush into venture by 'tourist VC's' from 2018-2021 has created a massive liquidity mismatch between fund sponsors and their LPs. The managers are focused on vanity metrics such as MOIC while investors are hoping for liquidity. When your fees are a percentage of AUM, this creates a powerful incentive to push your head in the sand and hope fair value eventually catches up. I think Sara Ledterman is spot-on here. Accounting firms all over the world will be FORCING managers to take write downs over the next 12 to 18 months. Opportunistic buyers of these assets should be in a fantastic position to acquire early-stage equity in future unicorns at fire sale prices!

Are you considering a portfolio sale? A very insightful post from Amy Lewin (Sifted) about VCs and secondary markets. I’m curious which VCs in my network are considering selling (part of) their portfolio companies. #alwaysbelearning #sharingknowledge #founders #investors #firstdegree

As the venture capital landscape transforms, one trend is gaining significant momentum - the rise of secondary transactions. I'm thrilled to share that TempoCap is at the forefront of this shift as we see more and more #CVCs and #VCs turning to single-asset and portfolio sales to generate liquidity in a market currently experiencing fewer M&A exits and IPOs.   Our deal flow at TempoCap has surged three to fivefold recently, especially on the portfolio side of our activity. This isn't limited to smaller players; even notable European CVCs and VCs are considering portfolio sales to generate some DPIs. It is probably the most sophisticated tech investor who is now considering secondary sales as a dynamic portfolio management tool.   Strategies vary across the board. While some prefer acquiring stakes in entire portfolios (LP secondary), we at TempoCap lean towards selecting a few standout companies within a portfolio, particularly those valued between €50-250m with disruptive technologies, significant revenue and fully funded business models.   Given the current market conditions, it's an opportune time for secondary firms. We predict the liquidity solutions TempoCap can provide will remain attractive for many years as an active way to generate some liquidity in a largely illiquid asset class (there are 9x more investments than exits in the European tech sector!).    For more insights, check out my comments in Sifted via the link below. Thanks to Amy Lewin for the insightful conversation. #venturecapital #secondaries #liquidity #portfoliosales

Big news from Index Ventures! We’ve raised $2.3bn in new funds—an $800m venture fund and a $1.5 billion growth fund. Across nearly three decades of investing, this latest announcement is possible because of a strong foundation built by exceptional entrepreneurs, incredible LPs, and a team of investors, strategists, and operators all deeply committed to our craft. 108 Index-backed companies have reached a valuation of $1 billion or more, 23 have surpassed a $10 billion valuation, and 57 became publicly traded companies. I look forward to seeing what the next generation of entrepreneurs will create. I can only imagine it will be even better than what I can envision today :) https://lnkd.in/gDxiN8ig

The hidden years of inception stage. Founders & LP’s rarely understand that the journey of building a great company can involve up to three years of work before an early stage VC will get involved. h/t Peter Walker for the years from incorporation data from Carta https://lnkd.in/e5fFkvDt #vc #founders #investing Antler