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Former Founders Fund GP Brian Singerman and co-founder and managing partner of Quiet Capital, Lee Linden, are seeking over $500 million for a new fund called GPx, three people familiar with their strategy told TechCrunch. A significant portion of GPx\u2019s fund, potentially as much as 50%, will come from Founders Fund co-founder Peter Thiel, these people said.<\/p>\n
GPx uses a two-pronged strategy. The firm will invest approximately 20% of the capital into funds managed by emerging VCs who are targeting pre-seed and seed-stage startups; the remaining capital will go toward partnering with emerging managers on leading later-stage investments (most likely at Series B) of their breakout companies.\u00a0<\/p>\n
It\u2019s a fairly different approach compared with how most venture firms operate. While typical VC firms invest all of their capital directly into startups, GPx is adopting elements of what\u2019s known as a fund-of-funds model, a less common investment strategy where a firm invests some portion of its capital into a portfolio of other funds, rather than directly in underlying assets, such as startups. While a fund-of-funds offers limited partners a convenient way to access under-the-radar or hard-to-access firms, a significant drawback is the dual layer of fees: those charged by the fund-of-funds and those by the underlying managers.<\/p>\n
While capital raised by fund-of-funds firms hit a 16-year low last year, according to PitchBook<\/a>, Singerman and Linden are betting that their personal brands, unique networks, and a strategy that\u2019s only partially a fund-of-funds will encourage limited partners to open their checkbooks for GPx.<\/p>\n Singerman and Linden may be on to something. As venture capital concentrates in the largest funds<\/a>, some of those firms\u2019 best investors are no longer interested in being a part of a big machine. They are leaving the behemoth firms to launch their own investing outfits where they can be more nimble and specialized.<\/p>\n GPx is betting that the next generation of VC investors will identify and back many strong early-stage companies, allowing Singerman and Linden\u2019s firm to co-lead later-stage investments in the emerging managers\u2019 most successful portfolio companies.<\/p>\n Here\u2019s where GPx\u2019s strategy becomes particularly valuable: early-stage VCs often try to exercise pro-rata rights in later funding rounds (Series A, B, and beyond), but their fund sizes typically prevent them from maintaining their percentage ownership in top-performing companies. When faced with such opportunities, small VCs often scramble to raise special purpose vehicles (SPVs) from their existing limited partners. Yet, these processes are time-consuming, allowing other investors to snap up coveted equity spots in the most sought-after deals.<\/p>\n With GPx\u2019s capital behind them, emerging funds will have an opportunity to not only exercise their pro-rata rights but also lead a later-stage round.<\/p>\n