Industry Ventures has raised $265 million for a new fund that buys stakes in VC funds on the cheap from limited partners looking for a quick exit. According to VentureBeat about 65 percent of the money came from pension funds and about half of the 20 investors were new investors.
As often happens in a downturn, there has been increased interest in secondary funds so far this year. Hedge fund research group Preqin estimates that secondaries will have a record capital-raising year, with a target of $30 billion, according to its annual poll of funds. According to Dow Jones’ Online Financial News the largest secondary fund, Coller Capital, is aiming to raise $8 billion to $10 billion in new funds this year — also a record for them.
Similar to distressed-debt funds, which buy debt for deep discounts during periods of weakness, funds like Industry Ventures buy stakes in VC funds from limited partners who want to avoid having to put more money into VC funds through so-called capital calls, or requirements to continue to invest a certain amount of money in the fund. Industry Ventures isn’t wasting time putting its money to work; it has already made 11 acquisitions, including the purchase of nine funds from Washington Mutual for $7 million.