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If you postulate investors to name the large challenge for venture capital today , you ’ll probably get a near - unanimous resolution : want of liquidness .
Despite endow in startups or VC pecuniary resource that increased in note value , due to the famine of IPOs , those wager are not generating much , if any , cash for their angel . That ’s the drawback of secret investment versus the public market place . percentage of companies in private fellowship like startups can not be sell at will . The companies must authorize their existing investors to deal their shares to approved others , known as secondary sales .
hard currency - athirst venture investor , whether VCs themselves or their modified partners , are more and more looking to sell their illiquid stead to secondary buyers .
Now , supply in that many early - stage startup were overvalued during the fundraising frenzy that peaked in 2021 and that those shares may now be worth less . That introduce a new and unparalleled opportunity to purchase stakes in seed - stage VC funds , as well as shares in startup , at relative buy .
Today , Cendana Capital , a fund of fund that invests in scads ofseed - stage venture firms , and partnerKline Hill Partners , a firm focused on buying diminished antecedently owned private plus , are announcing a fresh $ 105 million Kline Hill Cendana Partners fund , which is well above the $ 75 million target they initially skip to raise .
“ Over the retiring two year , we ’ve been hearing from our portfolio finances , ‘ We have a family function that wants to sell their $ 2 million commitment . Would you be concerned in buy it ? ’ ” said Michael Kim , founder and managing director of Cendana Capital .
Kim felt the opportunity to increase his firm ’s possession in venture funds and predict startups at a substantial discount was too good to pass up . But , since invest in lower-ranking plus necessitate expertise that none of Cendana ’s investors had , he decided to fall in force with Kline Hill .
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Raising money for this stock was easy , Kim say . Cendana ’s modified partners were asking Kim to take advantage of this buyer ’s food market .
“ We just passed the lid around to our existing L-P at Kline Hill and Cendana , ” said Kim .
Buying stakes in seed funds
What rig Kline Hill / Cendana ’s investment fomite asunder is that it ’s buying secondary interest in seed - point business firm and individual company from seed fund . Most be secondary musician are too large to go after this opportunity , grant to Kim .
It ’s firmly not to see the mutualism between the two firms . Cendana ’s relationships with its portfolio funds , include Lerer Hippeau , Forerunner Ventures and Bowery Capital , are helping it take the leading on sourcing petty deals . It then pass these opportunities to Kline Hill , which value , cover and negotiates the dealings price .
While Kline Hill has been investing in petty VC since the firm ’s introduction in 2015 , Chris Bull , a managing manager at the business firm , said that partnering with Cendana brings the character of information that ’s passing worthful to the investment process .
“ What ’s most exciting for us is we ’re able to get dealing done where I think either of us one by one would have had difficultness getting across the line,”Bull said .
The current plan is to invest the whole $ 105 million fund through the end of 2024 . The two firms are giving this joint venture a effort , and if it goes well , they ’ll raise a successor investment trust next class .
The two firm are not alone in noticing a bombastic opportunity in best up previously have venture bet . Traditional secondary investors , such asLexington PartnersandBlackstone , of late raised their heavy secondary funds ever . While these vehicles target all types of secret plus , investors say a portion of that capital letter is bound to go to speculation . In addition , Industry Ventureshas clean up a nearly $ 1.5 billion fund dedicated to secondhand VC .
But billion - dollar monetary fund like these “ typically focus on much , much gravid , more multistage business firm , ” Kim said . Applying such big finance tactics to the seed stage is far less prevalent .
Kline Hill / Cendana is on to something . With VC - backed ship’s company tending to delay private longer than their investors ’ 10 - class store cycle , the pauperization for liquid state will likely only stay to maturate .
