Industry Ventures is raising a new fund, dubbed Secondary X fund, in a bid to capitalize on VCs that are liquidating their stakes in portfolio startups at heavy discounts in the secondary market amidst the ongoing venture funding slump.
Venture capitalists are reportedly liquidating their stakes at steep discounts, as high as 50%, as exit opportunities dry up, per Industry Ventures' pitch deck seen by Financial Review. The situation is dire for venture funds that are nearing the end of their lifecycle and have to resort to such measures to rebalance their portfolio and return capital to LPs.
Industry Ventures intends to write individual checks between $5M and $75M in late-stage startups that are three to five years from a potential exit event and are reporting $20M to $200M in revenues along with a 30% to 40% growth.
- The VC firm expects to pick up stakes at a discount of 10% to 50%.
- Per its calculations, VCs liquidated their stakes at 68% of net asset values (NAV) in 2022, representing a 32% discount from the 88% NAV figures from 2021.
- It expects the values to drop further to 60% NAV in 2023.
- Industry Ventures had previously picked up stakes in Facebook, Twitter, and Airbnb at heavy discounts over its two-decade-long existence.
