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General Catalyst , one of Silicon Valley ’s largest capital firms , is gear up to launch what ’s known as a “ continuation investment trust ” Charles Frederick Worth between $ 800 million and $ 1 billion , harmonise to a person familiar with the plans .
A continuation fund consists of a portion of stakes that the VC firm has in portfolio troupe . With around$25 billionin assets under direction as of 2023 , General Catalyst ’s exact continuance investment firm portfolio composition is still being shape . However , it will in all probability include stakes in Stripe , Gusto and Circle , the person enunciate . The firm has latterly hired Jefferies as its secondary investment funds consultant .
Once the investment firm is build and investors are observe for it , General Catalyst ’s original limited mate will be offered a pick : sell their shares and cash out , making elbow room for raw investors , or continue invested in the continuance stock , a appendage bid ‘ seethe . ’
While secret fairness firms have used lengthiness funds for a farseeing time , the mechanics has only recently grown in popularity with venture capitalists , largely because of the dearth of IPOs and lag in M&A bodily process . This has coerce some orotund speculation capital firm to tip the secondary food market to render uppercase to their special pardner .
For instance , In July , Bloomberg reported that NEA sold stakes in 11 portfolio companies , including Databricks and Plaid , to secondary investors who together with paid$540 millionfor the asset . Lightspeed is also now in the cognitive operation of sell a group of existing company deserving as much as $ 1 billion to secondhand buyers .
Like NEA and Lightspeed , the General Catalyst continuation fund will lie of tardy - microscope stage inauguration whose economic value have revalue since the firm first invested in the plus .
General Catalyst did n’t reply to a request for comment .
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The primary benefit of a good continuation fund , as controvert to simply betray the shares outright to another buyer in a lower-ranking market transaction , is that it allows VCs to uphold to manage the portion , retaining any future upside of them . continuance funds are also regard more founding father well-disposed than secondary cut-rate sale of shares of individual startups because they do n’t introduce raw owner to a startups ’ ceiling mesa . The same VC continue invested , albeit through a different fund .
VCs have been more unforced to deal in the lower-ranking markets late because some L-P are telling them that they will restrain their investing in the VC ’s next investment trust if they don’treceive at least some cash returnsfrom their one-time investments .
Although continuation funds are generally a “ win - win ” for venture funds , they could be a conundrum for sealed limited partners . Since secondaries sell at a real deduction to current valuations — typically 20 % to 30 % off current valuations — when selling plowshare , limited partners may not only be take a haircut on existing valuations but also walking off from likely share monetary value maturation .
Still , one of General Catalyst ’s special partners told TechCrunch that , give the lack of liquid from speculation capital investiture , his pension fund will always elect to cash in rather than roll into a continuation fund .
As for when this LP will be offer up this option , the someone did n’t say , and it is n’t potential for TC to guess . Continuation funds are complex great deal that can take six months to a year to sell . These transaction can also go completely .
Last year , Tiger Global tried to sell a type of a continuation investment company called a striptease portfolio , which sells only a portion of stake in each company . But it could n’t find a purchaser willing to devote a price that the firm thought was fair , PitchBook cover .
When earlier this year , Shasta Ventures ask its limited partners to approve a continuance fund that was priced 35 % off its carrying value , the business firm ’s investor voted against the lot , Axios report .
In April , Financial Times reported that General Catalyst is near $ 6 billion in Das Kapital commitments for a new primary fund . The new investment company still has n’t been announced . When TechCrunch ask for more info related to its fundraising natural process last week , the house declined to point out .
