Industry Ventures, one of the largest buyers of secondary shares, has raised about $700 million to purchase more equity from VCs, hedge funds, startup employees and others. About $500 million is for the secondary fund and $200 million is separated into a special opportunities fund, in case Industry Ventures sees more opportunity beyond the initial $500 million.
Industry Ventures, which is also an LP in over 200 venture funds, has $2.7 billion in capital under management right now. The new fund, Industry Ventures Secondary VIII, is the firm’s largest fundraise to date.
Yet Hans Swildens, CEO and founder of Industry Ventures says they still have plenty of capital from existing funds and they aren’t ready to deploy this next fund yet. “We raised the money earlier so we’re prepared in case there is some sort of need for a liquidity provider at scale,” he told TechCrunch.
There has been a big disconnect between buyers and sellers in the secondary market as of late. While there have been plenty of people looking for liquidity, bubble fears have meant that buyers have been unwilling to pay the existing sky-high valuations. And sellers have been reluctant to give up shares at a discount.
“This year has been a year where a lot of the buyers in the secondary market have taken a pause,” said Swildens. “There’s a demand-supply imbalance today” and he estimates that at least 80% of the attempted secondary deals in first quarter didn’t end up getting done.
He believes that a lack of IPOs means that venture investors will face reality and “valuations are going to start to adjust.” Swildens expects that the prices of secondary shares are on their way down.
While Industry Ventures has purchased shares from a range of companies, including Uber and Pinterest, the majority are software and internet startups. They like to see at least $15 million in revenue and an annual growth rate above 30 percent before they invest.
Founded in 2000, Industry Ventures is headquartered in San Francisco and has offices in Washington, D.C.