As venture capital firms with multiple funds under management experience increasing time-to-liquidity in their aging portfolios, many funds hold promising portfolio companies that may require additional funding and have yet to reach an exit. Oftentimes, these funds have called all or nearly-all of their available capital and face incremental financing requests, “pay-to-play” financing terms or cram-down rounds with no more capital to invest. In such cases, the fund faces severe ownership dilution and subsequent erosion of capital.

In these specialized situations, a secondary fund may provide a solution by investing additional capital in a mature fund. This add-on enables the General Partner to continue to provide financing to active portfolio companies and protect pro-rata ownership positions in these promising companies. The additional capital investment received by the fund dilutes the original Limited Partners unless they choose to participate in the add-on alongside the new capital. This dilution may be considered acceptable when presented with the potential gains by funding additional follow-ons, avoiding fund dilution, loss of preference or other negative results of non-participation.

Industry Ventures has a dedicated team that will work closely with the General Partner and Limited Partner to complete a timely transaction. Their experience and knowledge allows them to move through the process quickly—from portfolio evaluation, to the issuance of a Letter of Intent (LOI), through final due diligence, legal document preparation, and deal consummation.

Industry Ventures, L.L.C. is a leading investment firm that capitalizes on inefficiencies within venture capital and technology growth equity. The firm invests in both secondary and primary opportunities, including direct portfolios, secondary directs, limited partnership interests and other special situations. Headquartered in San Francisco, with offices in the Washington, D.C. area, the firm manages more than $450 million of institutional capital.