General Partners

The reduced volume of IPOs and upside M&A exits, combined with the increasing requirements for company maturity and scale at exit, have caused many General Partners to plan for managing their portfolio lives far beyond traditional or contracted holding periods. This dynamic has created three unique situations where Delta-v can help GPs:

Reserve Shortfall: Many partnerships built their portfolios with two key assumptions. First, they assumed that later rounds of financing would be primarily supported by new outside investors. Second, the recycling of gains from early liquidity was assumed to help fund fees and reserves for the portfolio. Given the current fundraising and exit environment, both of these factors can cause a reserve squeeze for partnerships where the portfolio construction is complete. In today's environment, LPs are generally no longer supportive of annex funds. In the case of a reserve shortfall, Delta-v can help with an acute or long term liquidity need by purchasing some or all of the holdings of one or more mature companies in the portfolio. GPs can use these proceeds to fund the reserves for earlier stage promising companies in the portfolio, many of which may have otherwise suffered a negative ownership outcome if capital was not available for a mandatory financing. In this scenario, the sale of the maturing company position provides an exit opportunity for a minority holder that has a liquidity profile in advance of the broader syndicate.

Replacing Tired Syndicate Shareholders: In today's environment, mature venture and private growth technology companies often have the opportunity to consolidate their less capitalized competitors and create a leading market position. Such market leadership often rounds out product portfolios and drives significant incremental profitability. Mergers amongst private companies are made much easier when cash can be used as consideration. Vibrant funds and management are often held back in consolidation discussions by funds that no longer have capital to play for their share of a financing required to purchase a competitor. Unlike many secondary funds, Delta-v is able to make more generous reserve allocations for future financings. In the case of a tired investor, we can buy partial or complete stakes, and then support the company through its consolidation of the industry.

Tail End Funds: The sale of the remaining interests in an older fund can help return capital to LPs, and free GPs to focus time and energy on more current portfolios. LPs often prefer to clean up older partnerships which require significant resources in reporting and accounting for relatively little remaining value.

As experienced GPs, we understand your issues and can help creatively solve problems unique to the General Partner. Our behavior with management and co-investors is predictable and additive, and the primary cause why GPs look to us when they begin to realize they have diverging liquidity needs around a syndicated investment.