Although continuation funds have proliferated in the private equity space in recent years—the strategy accounted for 84% of the $68 billion in GP-led secondary deals in 2021, according to investment bank Jeffries—they are used less widely by VC investors. But this is changing as firms look at innovative ways to hold investments for longer.
The move also comes at a time when secondary deal activity is ramping up in the VC space, while IPOs and SPAC listings slow down. This has been the case in Europe in particular, where, despite 2021 being an outstanding year for IPOs, tech stocks have performed poorly. This year, VC-backed IPOs are expected to decline in value, as mature companies eschew costly and risky public listings in favor of late-stage capital, according to PitchBook’s 2022 European Private Capital Outlook.
Sequoia made waves last year when it restructured its portfolio investments into a single master fund. Among other things, the move liberates the firm from the 10-year lifespan of a traditional fund and therefore the pressure to exit after three to five years.
HV Capital’s new vehicle, called HV COCO Growth, will acquire all investments made between 2010 and 2015 from HV IV, HV V and the HV Co-investment Fund. HarbourVest is the anchor investor for the fund, which has additional backing from LGT Capital Partners and Pathway Capital, among others.
“We are transferring many strong investments such as FlixMobility, Global Savings Group and SumUp from existing funds into a new structure,” HV general partner Martin Weber said in a statement. “This gives us more leeway to support our portfolio companies in the long-term.”
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