Goldman Sachs is planning to buy the 25-year-old, San Francisco-based investing firm Industry Ventures and its $7 billion in assets under management, CNBC reported first on Monday. The deal highlights the increasing significance of secondary markets and buyouts as traditional venture exits lag.
The investment bank is providing up to $665 million in cash and equity, with as much as $300 million more conditioned on the firm’s performance through 2030, according to a release from Goldman Sachs. The transaction is expected to close in the first quarter of next year, and all 45 employees of Industry Ventures are expected to join Goldman Sachs. We have contacted Swildens for further details.
The deal is being closed at a time when venture funds are increasingly looking to non-traditional exits, thanks to an extended lack of IPOs that only now seems to be showing signs of loosening up. In an episode of TechCrunch StrictlyVC Download last year, Industry Ventures founder and CEO Hans Swildens observed that tech buyout funds are now responsible for 25% of all liquidity in the overall venture ecosystem — “a huge chunk of liquidity,” as he put it.
Venture managers are adjusting simply put, venture managers must adjust their mindset, instead of scaling back or pressing Pause on their investment activity. “Just going out and seeing the companies, putting them in your fund and waiting for an IPO or strategic M&A exit probably won’t work as well anymore,” he was quoted as saying in the podcast. “[VCs] have to start developing alternative liquidity solutions.”
He did at the time — in April, that is — observe that some five major venture funds had brought on full-time staff to effectuate non-traditional exits, including secondary transactions (i.e., earlier backers selling shares and founder shares as part of an additional round of funding), continuation funds, and buyouts. “All the brand-name funds are all staffing up and thinking through liquidity structures,” Swildens said.
The acquisition is part of Goldman’s push to expand its $540 billion alternatives investment platform, which the bank has singled out as a key growth franchise.
“Industry Ventures’ deep partnerships and venture capital acumen are a powerful addition to our investing franchises, providing clients with access to the most rapidly growing companies and sectors in the world,” Goldman Sachs chief executive David Solomon said in prepared remarks.
“By leveraging the global capabilities of Goldman Sachs with Industry Ventures’ leadership in venture capital, we are well positioned to address the growing complex needs of entrepreneurs, private technology companies, limited partners and venture fund managers,” it continued.
According to the Mid Breaker, Industry Ventures says it has more than 1,000 investments under its belt, holds positions in over 700 venture funds and touts an internal rate of return of 18%.
