12/18/2023 0 Comments Venture capital fund terms![]() ![]() So far, we haven’t seen too many traditional funds like IVP, Meritech, DFJ Growth, Iconiq drop in structures as much. So mutual funds, hedge funds, private equity firms - they’re mostly dropping in structure into the securities now.Īre VCs not inserting these same terms in deals? About a month ago is when a lot of the crossover funds and hedge funds readjusted either where they were investing, or the terms and conditions of their financings. And then February and March were the two months that people started experiencing daily declines in their public stock portfolios. When did these provisions start showing up in term sheets? So new financings are happening, but they’re happening with structure so that they look kind of like a high-yield debt-equity instrument. There’s a lot that happening at that stage of the market where the companies have maybe $100 million in revenue but their last round was done at a $5 billion valuation. Or minimum compounded return hurdles of 20% IRR. Or senior 1.75x with an anti-dilution ratchet into an IPO. Like one-and-a-half times investors’ money back, plus participation. ![]() You mean deal terms? What kind are you seeing? HS: With late-stage, pre-IPO unicorn rounds, we’re seeing them continue to get done but with structure. Are you seeing a pullback in late-stage VC? TC: Since January, we’ve been hearing a lot of late-stage investors are more interested in publicly traded shares whose prices have nose-dived. For readers who work outside of VC, we’ve layered in some of our own notes in brackets to explain some of the terms he’s using. He talked animatedly about everything from VC distributions, to the secondaries market, to the reappearance of deal terms meant to protect investors (and that all but disappeared until recently, as VCs eager to close deals threw caution to the wind).īelow are some highlights from that chat, which offers a useful snapshot of current conditions that other investors – and founders – might benefit from knowing, even while Swildens himself offers that this moment could be a blip. We caught up yesterday with Swildens, whose firm has locations in London and Alexandria, Virginia, but who is based in San Francisco, where he spoke from his office near the iconic Transamerica Pyramid. And it has a vibrant secondaries business, so it knows when people are open to selling stakes in companies, when they aren’t, and where the market is pricing pretty much everything. It’s a limited partner in others’ buyout funds. The firm makes both direct investments and invests in venture funds. Industry Ventures is now managing $5 billion in assets – nearly $1 billion of it raised last year - across numerous strategies and vehicles. If you’re trying to get a pulse on what’s happening in the venture market right now, you could do worse than talk with Hans Swildens, founder of the 22-year-old investment firm Industry Ventures. ![]()
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