Please bear with us as we try to keep up with the rapidly changing secondaries market. Just two weeks ago, we updated our Guide to VC Secondaries Buyers with two new entries. Now we’re adding six more.
Our original guide, published in July, was made up of a dozen firms with a combined $52 billion in secondaries capital. Today, it has details on 26 firms with more than $67.5 billion in secondaries capital.
Liquidity has been top of mind for LPs and GPs for awhile now. While M&A activity trended upward in the first half of the year, Q3 data from Crunchbase is a little worrisome.
The data provider says that M&A activity for venture-backed companies hit a low of 362 deals in Q4 2023 before rising to 422 deals in Q1 2024 and 500 deals in Q2. However, the number fell to 479 in Q3. A quarterly drop of just 21 deals may not seem like a big deal, but Q3’s total represents a 17 percent decline from the same quarter a year earlier, suggesting M&A may remain slow in the near-term.
With Donald Trump winning the 2024 US presidential election, the public markets saw substantial gains across the board on Wednesday, but it’s too early to tell if there will be “a big uptick” in M&A, as Snap chairman Michael Lynton predicted on CNBC.
Sam Lawson, founding partner of Flywheel Capital (one of the new firms added to our guide), says that venture firms should start engaging with the secondaries market regardless of where M&A and IPO activity are headed.
“It’s our view that all VC firms will become secondary firms as well over time,” Lawson explains. “All of the great ones, like the Lightspeeds of the world, are starting to delve into secondaries because they see the benefit in terms of portfolio management.”
We included Lightspeed in one of our previous updates. Here are some of the newer firms we have added.
Flywheel Capital
Flywheel was founded in 2022 as Abacus Capital Management by Lawson, a former executive at British crowdfunding platform CrowdCube, Darren Westlake, co-founder and former CEO of CrowdCube, and Gavin Cunningham, a long-time M&A attorney and family office investor.
The trio rebranded to Flywheel this summer as they launched their new “pure-play hybrid secondaries fund” and its three associated SPVs, all of which have raised a combined $10 million. The fund recently held a first close on an undisclosed amount, anchored by venture fund incubator Allocator One, towards its target of $25 million.
Flywheel aims to bring tools from equity and debt investing to address inefficiencies it sees in the current way venture GPs and LPs view liquidity. Lawson says that the firm’s strategy is based in preferred equity, and while he declines to share specifics about how Flywheel structures its deals, he did say that it underwrites its investments on both an equity and credit basis to give GPs, LPs and company founders access to short-term liquidity without having to sell whole company stakes.
Read more about Flywheel: Flywheel brings PE toolbox to venture secondaries
KHC Partners
KHC Partners is a joint venture between Kline Hill Partners, a private equity and venture capital secondaries specialist, and Cendana Capital, a fund of funds manager focused on seed-stage venture funds. KHC closed on $105 million in April to invest in seed-stage fund stakes from LPs and direct secondaries deals in the underlying companies of those funds.
Chris Bull, who oversees the fund’s investments for Kline Hill, where he is a managing director, told TechCrunch that KHC plans to invest the full amount of the fund through the end of this year. Assuming the outcomes are good, it expects to raise a second vehicle in 2025, he said.
Nodem Capital
Nodem Capital is a brand-new secondaries specialist that aims to provide “tailored liquidity solutions” to venture capital GPs and LPs, says founder Alexander Branton. He launched the London-based firm this summer after serving as an associate investment director at money manager Cambridge Associates and spending nearly six years as a partner at emerging markets-focused private investor Sturgeon Capital.
Nodem is still in the process of receiving regulatory approval to begin investing, but plans to do so as early as Q1 2025, Branton tells Venture Capital Journal. Once he’s up and running, he plans to provide partial liquidity to GPs and LPs focused on emerging markets that “want to maintain exposure to portfolios of high-quality technology assets” through preferred equity investments.
If you know of any firms missing from our secondaries guide, please shoot me an e-mail: ryan.h@pei.group.
Please bear with us as we try to keep up with the rapidly changing secondaries market. Just two weeks ago, we updated our Guide to VC Secondaries Buyers with two new entries. Now we’re adding six more.
Our original guide, published in July, was made up of a dozen firms with a combined $52 billion in secondaries capital. Today, it has details on 26 firms with more than $67.5 billion in secondaries capital.
Liquidity has been top of mind for LPs and GPs for awhile now. While M&A activity trended upward in the first half of the year, Q3 data from Crunchbase is a little worrisome.
The data provider says that M&A activity for venture-backed companies hit a low of 362 deals in Q4 2023 before rising to 422 deals in Q1 2024 and 500 deals in Q2. However, the number fell to 479 in Q3. A quarterly drop of just 21 deals may not seem like a big deal, but Q3’s total represents a 17 percent decline from the same quarter a year earlier, suggesting M&A may remain slow in the near-term.
With Donald Trump winning the 2024 US presidential election, the public markets saw substantial gains across the board on Wednesday, but it’s too early to tell if there will be “a big uptick” in M&A, as Snap chairman Michael Lynton predicted on CNBC.
Sam Lawson, founding partner of Flywheel Capital (one of the new firms added to our guide), says that venture firms should start engaging with the secondaries market regardless of where M&A and IPO activity are headed.
“It’s our view that all VC firms will become secondary firms as well over time,” Lawson explains. “All of the great ones, like the Lightspeeds of the world, are starting to delve into secondaries because they see the benefit in terms of portfolio management.”
We included Lightspeed in one of our previous updates. Here are some of the newer firms we have added.
Flywheel Capital
Flywheel was founded in 2022 as Abacus Capital Management by Lawson, a former executive at British crowdfunding platform CrowdCube, Darren Westlake, co-founder and former CEO of CrowdCube, and Gavin Cunningham, a long-time M&A attorney and family office investor.
The trio rebranded to Flywheel this summer as they launched their new “pure-play hybrid secondaries fund” and its three associated SPVs, all of which have raised a combined $10 million. The fund recently held a first close on an undisclosed amount, anchored by venture fund incubator Allocator One, towards its target of $25 million.
Flywheel aims to bring tools from equity and debt investing to address inefficiencies it sees in the current way venture GPs and LPs view liquidity. Lawson says that the firm’s strategy is based in preferred equity, and while he declines to share specifics about how Flywheel structures its deals, he did say that it underwrites its investments on both an equity and credit basis to give GPs, LPs and company founders access to short-term liquidity without having to sell whole company stakes.
Read more about Flywheel: Flywheel brings PE toolbox to venture secondaries
KHC Partners
KHC Partners is a joint venture between Kline Hill Partners, a private equity and venture capital secondaries specialist, and Cendana Capital, a fund of funds manager focused on seed-stage venture funds. KHC closed on $105 million in April to invest in seed-stage fund stakes from LPs and direct secondaries deals in the underlying companies of those funds.
Chris Bull, who oversees the fund’s investments for Kline Hill, where he is a managing director, told TechCrunch that KHC plans to invest the full amount of the fund through the end of this year. Assuming the outcomes are good, it expects to raise a second vehicle in 2025, he said.
Nodem Capital
Nodem Capital is a brand-new secondaries specialist that aims to provide “tailored liquidity solutions” to venture capital GPs and LPs, says founder Alexander Branton. He launched the London-based firm this summer after serving as an associate investment director at money manager Cambridge Associates and spending nearly six years as a partner at emerging markets-focused private investor Sturgeon Capital.
Nodem is still in the process of receiving regulatory approval to begin investing, but plans to do so as early as Q1 2025, Branton tells Venture Capital Journal. Once he’s up and running, he plans to provide partial liquidity to GPs and LPs focused on emerging markets that “want to maintain exposure to portfolios of high-quality technology assets” through preferred equity investments.
If you know of any firms missing from our secondaries guide, please shoot me an e-mail: ryan.h@pei.group.
