Industry Ventures Wraps Up $265M Secondary Fund

By Daniel Hausmann

In a high time for the secondary industry, venture secondary investor Industry Ventures has closed its latest fund at a revised hard cap of $265 million.

Industry Ventures Fund V LP had been on the market since early 2008 with a target of $200 million and cap of $250 million. The fund was substantially raised by December, but Principal Hans Swildens said the firm had to return to LPs to get the hard cap raised and allow for all relevant documents to be produced. The final close was held in the middle of last week.

Publicly disclosed LPs include South Carolina and San Bernardino County Employees' Retirement Association. Pensions made up about 65% of the limited partners, and up to 10 of the investors in Fund V are new Industry Ventures LPs.

"This was quicker than our last fund-raise and a much easier process," Swildens said. "Our team has a good relationship with our existing investors. The secondary market is a growing market and there are more opportunities for investment in this market."

Industry Ventures has already deployed about a quarter of the fund; the firm did about 40 deals last year, compared with 27 in 2008. Since beginning to invest Fund V in September 2008, the firm has done 11 transactions involving 23 venture fund interests and 11 direct secondary acquisitions of stakes in companies. The sellers and funds involved were largely undisclosed; deal sizes ranged from $1 million to $20 million, with reserve equity counted.

One deal included the acquisition of a portfolio of nine venture funds from Washington Mutual for nearly $7 million and the assumption of around $8.6 million in outstanding commitments. Industry Ventures opted not to pick up a 10th fund, Northwest Venture Partners III LP. Swildens said it didn't make sense to purchase that stake and declined further comment.

Fund V, on its own, will make purchases of $1 million to $25 million in size. If a deal is larger than that, the firm will raise co-investment vehicles with Fund V LPs on a deal-by-deal basis. The firm did that with the $107 million Industry Ventures Fund IV LP, which closed in January 2007 and boosted buying power by about $15 million.

Industry Ventures' fund performance was not disclosed.

The San Francisco-based firm was founded in 2000.