While the venture capital downturn may not be great for most of the industry, one part is preparing to be busier than ever—the secondary market.
“Every time a market sells off, there’s always good opportunities,” said Hans Swildens, CEO and founder of Industry Ventures, one of the largest and oldest VC secondary investors.
The firm’s LPs have recognized that venture fund managers and other LPs will be looking for more liquidity than ever in the secondary markets. Interest in secondary sales has ratcheted up amid a nearly closed IPO market and lackluster M&A exits. Firms as large as Tiger Global began to look for ways to realize liquidity on their investments.
Industry Ventures announced Wednesday that it has raised a 10th flagship secondary fund at $1.45 billion. The vehicle is 70% larger than its $850 million predecessor, which closed in 2021. The firm also announced a $250 million second tech buyout fund.
The secondary fund will offer various types of liquidity solutions—buying LP interest, continuation vehicles and secondary stakes in later-stage companies.
Since its founding in 2000, Industry Ventures has made over 600 investments, including taking over LPs’ interests in 400 VC funds and 170 direct share purchases. These deals resulted in exits from companies such as Uber, Alibaba, Nubank, Twitter and Roblox.
The majority of secondary deals are expected to sell at a deep discount, which will allow firms like Industry Ventures to buy them at an attractive price.
“The secondary volume has picked up a lot from last year,” said Swildens. “There’s a lot of activity, but it’s still about a third of what it should be. I think we’re nine months into what will be a three-year normalization process.”
Swildens said in an email that the firm launched its separate tech buyout strategy in 2018 because about 20% of all VC-backed companies are purchased by buyout funds.
Industry Ventures’ second tech buyout fund, which is twice as large as its $125 million predecessor, will invest as an LP in small tech buyout funds and take controlling positions directly in companies. To date, the firm has backed 14 buyout funds and made 14 buyouts of software companies.
This latest fundraise brings Industry Ventures’ AUM over $7 billion.
Featured image by Abstract Aerial Art/Getty Images
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