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 News. A portion of GPx’s fund will likely come from Founders Fund co-founder Peter Thiel, these people said.
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.
It’s 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’s 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.
While capital raised by fund-of-funds firms hit a 16-year low last year, according to PitchBook, Singerman and Linden are betting that their personal brands, unique networks, and a strategy that’s only partially a fund-of-funds will encourage limited partners to open their checkbooks for GPx.
Singerman and Linden may be on to something. As venture capital concentrates in the largest funds, some of those firms’ 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.
GPx is betting that the next generation of VC investors will identify and back many strong early-stage companies, allowing Singerman and Linden’s firm to co-lead later-stage investments in the emerging managers’ most successful portfolio companies.
Here’s where GPx’s 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.
With GPx’s capital behind them, emerging funds will have an opportunity to not only exercise their pro-rata rights but also lead a later-stage round.
The Information previously reported that Singerman and Linden are launching GPx, but didn’t provide details about the fund’s target size and other strategy details.
Singerman and Linden didn’t respond to a request for comment.
Editor’s note: This story has been updated to reflect Peter Thiel’s involvement with GPx.
