Coller Capital and HarbourVest Partners are lead buyers on a complex process run by Insight Venture Partners to move assets out of older funds into a newly created vehicle, four sources told Buyouts.
The Insight Venture process is one of several large GP-led secondary deals run by high-profile venture firms. Others included a $1.4 billion spinout process by NEA last year and a fund restructuring by Altos Ventures.
Coller and HarbourVest are leading an investment group that also includes Partners Group and Hamilton Lane. The deal could be valued at around $1.4 billion, two of the sources said. Pricing is at a slight discount, around 96 percent of net asset value across each fund, one of the sources said.
New York-based Insight is moving various assets out of older funds and into a continuation vehicle that will allow the GP to continue managing the investments. LPs have the option to sell out of their exposure to the older funds or roll their stakes into the new pool, sources said.
The restructuring involves several funds, including IVP Funds IV and V, which the firm is winding down, two of the sources said. Assets also are being extracted from more recent funds, they said.
The process, for which Lazard is working as secondary adviser, has moved through its election period—during which time existing LPs are able to choose to sell or stick with the GP. It’s expected to close in the fall, sources said.
Insight Venture Partners IV, a 2000 vintage that closed on more than $740 million, was generating a 9.4 percent net internal rate of return and a 1.7x multiple as of Sept. 30, 2018, according to performance data from California Public Employees’ Retirement System.
Fund V, a 2005 vintage that raised $675 million, was producing a 22.7 percent net IRR and a 3x multiple as of the same date, CalPERS said.
Insight Venture, formed in 1995 by Jeff Horing and Jerry Murdock, manages more than $20 billion. The firm invests in high-growth tech companies and has exposure to some of the biggest names in the tech world, including Twitter, Hootsuite, Mimecast and Zenefits.
Most recently, the firm closed its tenth fund on $6.3 billion last year. It closed Fund IX on $3.3 billion in 2015 and $2.5 billion for Fund VIII in 2013.
Spokespeople for Insight Venture did not respond to requests for comment. Spokespeople with Coller, Hamilton Lane, HarbourVest and Partners Group declined to comment.
The Insight process is one of several in the venture world expected to boost venture secondary activity. NEA completed a deal last year that moved 31 assets from four older funds from 2006 to 2015 into a new fund managed by former NEA executive Ravi Viswanathan, who launched spinout firm NewView Capital.
Goldman Sachs led the investor group on the NEA deal that also included Hamilton Lane in buying the assets out of the older funds and kicking in fresh capital for add-ons and new investments.
Altos Ventures earlier this year worked on a restructuring of its 2008 fund, moving assets into a continuation vehicle, into a deal led by Greenspring Associates.
Secondaries intermediary Greenhill Cogent found that venture funds were about 29 percent of secondary-market volume in 2018, up about 7 percentage points from 2017. Total volume came in around $74 billion last year, the firm said.
Greenhill Cogent said venture/growth represented 12 percent of total GP-led deals in the secondary market last year.
This increase was driven by “sellers looking to lock in returns and reduce exposure to certain venture managers that have generally been slower to distribute relative to their buyout-focused peers,” according to Greenhill Cogent’s 2018 year-end secondary-volume report.
Action Item: Check out Insight Venture’s Form ADV here: https://bit.ly/2USIyOc