A strip sale occurs when a secondary fund buys a portion of all or certain portfolio companies remaining in a fund. Most often, the General Partner utilizes a strip sale to generate recyclable proceeds that can be used for follow-on investments in promising portfolio companies, while others use it to reduce or eliminate debt most commonly found in SBIC funds. Strips are frequently used in other circumstances as well.

Strip sales are an effective way to increase the available capital for a venture fund to use to fund follow-on investments in existing portfolio companies. Venture funds with portfolio companies that require additional follow-on capital in excess of the fund’s existing reserves may initiate a strip sale with a secondary purchaser to free-up follow-on capital. The secondary purchaser buys a small equity portion in all or a subset of the fund’s portfolio companies from the venture fund, then the venture fund uses this capital for follow-ons and/or to make a distribution. This allows the venture fund to continue funding its promising companies while also creating a partial realization in its portfolio.

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.