Capture Value and Liquidity from Venture Secondaries
Knightsbridge defines venture capital secondaries in two ways: Limited Partner (“LP”) secondaries and direct secondaries.
LP secondaries refer to the purchase and sale of investment fund interests from existing limited partners (in this case, venture capital).
They represent an investment in existing portfolio assets versus a capital commitment to an investment in assets yet to be identified (sometimes called “blind pool”). Due to the mitigation of blind pool risk, capital may be deployed more quickly, resulting in a typically shortened time to liquidity compared to primary venture investments. Further, LP secondary investments are typically purchased at a discount relative to the current book value or via structured transactions. Buying assets at discounts typically provides for downside protection and an attractive risk-return relationship.
Similarly, direct secondaries are investments into established assets rather than seed and early-stage companies.
We believe Knightsbridge is well-positioned to identify portfolio companies of venture capital firms that are value drivers of the respective portfolio. Companies that Knightsbridge intends to target are typically later stage and generate significant revenues while still enjoying outsized growth rates. Like LP secondaries, direct secondaries typically have a shorter time to liquidity compared to primary venture investments and are often purchased at a discount.
Knightsbridge seeks to participate in a virtuous cycle to maintain or gain access to premier venture-backed founders and companies.
Given the breadth and vastness of the LP secondary and direct secondary markets, the challenge lies with Knightsbridge to source and opportunistically select attractive secondary deals. We believe Knightsbridge’s unique insights, relationships, resources, network, and experience in this niche market provide our funds with a sound advantage in the market.