Stage1 Ventures Into "DST Deals"
Stage1 Ventures is raising $250 million for a new platform that will invest in hybrid venture deals, with a first close is expected to occur by the end of June. Hybrid venture deals typically include both a primary and secondary investment. The former is used for working capital and other corporate purposes, while the latter is used to provide liquidity to early company employees and/or shareholders. Such transactions have been dubbed "DST deals," after Digital Sky Technologies, the Russian investment house that has used the model for later-stage investments in Facebook and Zynga. Earlier practitioners included Advanced Equities and Technology Crossover Ventures, while Elevation Partners recently got in on the action with its $100 million deal for Yelp ($25m primary, $75m secondary). David Baum, who co-founded Stage1 four years ago as an early-stage investor, says that the past year's liquidity crunch caused his firm to become inundated with direct secondary dealflow. Its $25 million debut fund, however, had neither the capital nor strategic flexibility to pursue such deals. The result was a new barbell strategy, in which Stage1 Ventures will be complimented by the platform, called S1 Capital Partners (yes, the "S1" is supposed to reference an IPO filing).
