Industry Ventures, a San Francisco-based fund of funds, has held a final close on its latest vehicle, Partnership Holdings III, with commitments of $170 million. The fund was oversubscribed, according to the firm.
Industry Ventures specialises in backing seed and early stage fund managers. It makes primary investments and is an active buyer of secondary fund interests, while also co-investing alongside its favoured GPs.
Recent examples of funds it has backed include Altos Ventures, Foundry Group, Lowercase Capital, OATV and Upside Partnership. Past successes have included Twitter, Uber and Zynga. “There isn't a friendlier, more decisive, or visionary LP in the business today – period,” Lowercase managing director Christopher Sacca said today.
The close of this latest vehicle means the firm now has more than $2 billion of assets under management.
“The closing of Partnership Holdings III and the $2 billion threshold represent significant milestones for the firm and affirm both our differentiated position in the marketplace and our investors’ ongoing trust in our team and strategy,” CEO Hans Swildens said today.
The firm was recently ranked as the best performing US fund of funds of 2014 by data provider Preqin.
Swildens told PEI recently that this segment of the market was enjoying an unprecedented amount of liquidity. “We've seen a doubling of demand, with some big pools of capital entering the market,” he said. “Public market investors like Wellington, Fidelity, and T Rowe Price have been buying shares in companies, and large asset managers with big buyout programmes like TPG have been coming into the venture market at the later stage. So if you look at the volume of cash now being invested in growth companies – companies like AirBnB and Uber, for example – there's a huge pool of capital to access.
This making the market more difficult to navigate, he added. “Because the market's so liquid, it's also a bit trickier. Prices are up, so it's more difficult to buy. Owners might get early liquidity, or they might get distributions elsewhere that will solve their liquidity issues. So it's a bit more challenging to invest in the right deals.”
However, he insisted that Industry Ventures had no intention of changing the approach that had stood it in good stead to date. “We're not really changing anything. Some people seem to think that if you're going to invest money today, you need to adjust your IRR and multiple targets. I think when you start doing that, it's typically a very bad sign. We've been doing this for almost 15 years; we've been through three different cycles. The last thing you want to do is change your targets and diligence processes.”