Industry Ventures works with Limited Partners (LPs) in venture capital funds in a variety of ways. Whether LPs are looking to rebalance allocations in a portfolio of investments, maximize IRR, or realize the value created to date in a particular fund, Industry Ventures will work to structure a liquidity option that meets your needs.
Why Limited Partners Sell
Limited Partners in venture capital funds typically seek liquidity in the secondary markets for the following reasons:
Rebalance portfolio allocations in favor of some other asset classes.
IRR considerations: as a venture fund reaches its final years, a Limited Partner (LP) may choose to sell the fund’s tail-end.
Event of default: under some conditions, a LP may be without the cash to meet his capital call requirements.
Will the Price Be Fair?
Even when highly motivated to achieve liquidity, LPs may be hesitant to sell their interest for a variety of non-financial reasons. Industry Ventures works to assure LPs that they not only will receive market value for their investments, but also that the transaction will proceed in an efficient and confidential manner.
One of the most important questions asked by LPs concerns the method a secondary fund uses to value assets. Industry Ventures values assets on a fundamental basis rather than exclusively relying on an “asset discount” methodology. With an exclusive focus on venture capital assets, Industry Ventures has worked with hundreds of venture firms and maintains a proprietary database on thousands of portfolio companies. Through its experience as a direct investor or co-investor, Industry Ventures has gained a reputation as a trusted partner with unparalleled industry and market knowledge.
The Engagement Process
Industry Ventures has created a streamlined process that favors efficiency and confidentiality. The entire process from asset evaluation to the completion of a transaction can take less than three weeks. The process requires LP and General Partner (GP) participation.
As a first step, Industry Ventures will sign a non-disclosure agreement (NDA) with the seller to maintain confidentiality. Second, the GP will release the LP reports, which contain all relevant fund information, portfolio company information, and financials. From the information provided, Industry Ventures will conduct a quantitative and qualitative evaluation, and offer a market price to purchase the LP’s commitment to the fund.
Industry Ventures will then generate a letter of intent (LOI) which outlines the requirements to complete a transaction. Once the seller accepts a final LOI from Industry Ventures, we draft purchase and transfer agreements, complete legal due diligence and the transaction is consummated.
Working with Industry Ventures
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.