Venture Capital Liquidity Fund
Venture Secondary Fund: Buy the Winning Ticket at Halftime
Klimaworks Ventures focuses on venture capital secondary transactions and provides structured liquidity solutions for early-stage shareholders and investors in climate change-focused companies that will lead the world to net-zero emissions.
Our “Skip the J-Curve” strategy buys venture portfolios and companies when they are 5-10 years old, after winners have emerged. The first 5 years of most VC funds are usually high-risk with many failures. However, in later years portfolio value is more stable and concentrated in fast-growing companies already doing well, with exits and IPOs likely in 3-5 years.
Investors get discounted access to top-performing funds with established winners and unicorns, and cutting the typical 10-15 year VC holding period in half.
A GROWING OPPORTUNITY IN DIRECT VENTURE CAPITAL SECONDARIES.
In a market where valuations and returns have shifted from public to private markets – and where capital inflows to VC are driving record competition for access to primary rounds in high-profile companies – our team at Klimaworks Ventures focuses on VC-backed climate tech firms at the later growth stage.
Many companies chose to defer their IPOs and remain private for longer, thereby increasing the demand for liquidity solutions in the secondary market. Often, founders are so focused on building products, and on the company’s survival, that they lose sight of the bigger picture - not just for their company but for themselves. If they feel they have no options to obtain partial liquidity, they may be more inclined to exit early rather than building something meaningful, impactful and of significant magnitude in terms of scale.
This is where secondary solutions come in: Funds often reach their vintage life and need to offload certain investments in order to provide returns to their investors. Others need to re-balance their portfolios by selling down some assets on the secondary market. For employees, personal circumstances may dictate such behavior, e.g. buying a house, going through a divorce or investing in their children’s education are all circumstances that may require access to some liquidity. Similarly, early investors are looking for ways to exit as they no longer have the capacity or strength to invest in follow-on tickets. Almost every growth-stage company has such investors and as their ability to fund growth is exhausted, founders need to find new capital to achieve scale and realise their ambitions. These early investors and can be replaced with more institutional investors, with deeper pockets, and often more supportive capital, which can also contribute to bridge round financing.
Liquidity funding is a flexible way of allowing shareholders to realise early returns in between regular fundraising rounds. This allows them to exit partially or fully and provide returns to their own investors. Furthermore, this simplifies the investor structure within the company.
Access in the late growth stage is hugely competitive and usually reserved only for the largest names in VC. By using secondaries as a unique entry point, Klimaworks is able to access established and higher-growth private companies with a clear pathway to profitability.
Our climate change-focused portfolio companies are on a later state growth trajectory, typically between the Series C and E stages, and turning to the secondary market to address liquidity challenges because of their extended life in private markets. We invest on a two- to four-year timeline with a clear runway for value accretion.
Klimaworks is well connected in the European VC ecosystem and works with VC managers, corporate leadership teams, existing investors, and other stakeholders, to solve liquidity requirements and facilitate secondary investments.
The fund is a venture capital secondaries fund that will primarily acquire Limited Partner (“LP”) and General Partner (“GP”) interests in established venture capital funds, and direct secondary in breakout portfolio companies.
We create direct exposure by providing secondary liquidity to early shareholders, founders, professional investors and employees outside of major funding or exit events. We also create indirect exposures by purchasing individual LP interests from the investors of the venture funds that back them.
Our investment can also be combined with some primary capital for the company itself.
We normally invest between major rounds of financing.
We are seeking minority positions which qualify for Board participation or extensive information rights, allowing us to be a reasonably active and value-added investor.
The focus of Klimaworks Ventures is exclusively on the climate change-focused venture space.
Within the climate tech universe, we are largely sector and business model agnostic as our later stage focus means that our target businesses are well proven in terms of product and sales viability.
The secondaries fund product requires a flexible and creative approach. Some of the criteria we are looking for:
Late stage growth, usually Series C+, and past key business and technology risks.
Investments are driven by climate change thematics that contribute to global efforts for decarbonization at scale.
Exceptional founding team that has built a market or segment leader.
Large and growing market allowing considerable further growth.
Early stage shareholders keen to access liquidity for reasons unrelated to the company’s own prospects and founders welcoming us into the cap table.
Flexible ticket size in company led secondaries and unique primary rounds.
Visible path to future liquidity
Klimaworks invests in cutting-edge companies that will lead the world to net-zero emissions in sectors where efforts are essential in fighting climate change: electricity, transportation, agriculture, manufacturing and buildings.
We invest in visionary entrepreneurs, building companies that can have a significant impact on climate change at scale.
WHO WE BUY FROM
who see a liquid market for their ESOP as being a major reason to join or stay at a ventures stage company
who like to realise some returns and reinvest the cash across another cohort of early stage startups
who want to lock in some gains on their best performers or who are reweighting their porfolio
who often appreciate realising a small percentage of their holding to help temselves and their families along the journey
Ability to get partial liquidity to cover lifestyle needs while not burdening the company cash flow.
Option to retain and/or capitalise on pre-emption rights at future funding rounds.
For the Shareholders
Opportunity to de-risk investment positions (fully or partially).
Liquidity planning to fit investment horizon criteria or fund life limitations.
For the Early-stage GPs / Venture Funds:
Show realized gains in order to facilitate fundraising for their next fund
Generate cash for operational expenses, recycling, or distributions
De-risk the investment by taking (some) money off the table
For the company
Rationalise a fragmented cap table and the associated shareholder management.
Restructure the shareholder base to achieve a more institutional profile.
Gain a constructive shareholder with domain expertise and regional network access.
Alleviate shareholder pressure for liquidity, which might otherwise restrict further company development.
Any secondary transaction involves at some stage the founder or CEO. Our process is designed around taking the distraction of being a market-maker on company stock away from management by reaching a quick clear investment decision with minimal fuss and overhead.
No matter who the vendor of the shares might be, we require that the founder or the CEO be notified that the vendor is exploring a secondary transaction. Better still, the founder will already be in the loop before Klimaworks is approached. We will often also speak to at least one of the company’s venture backer prior to engaging in serious discussion.
Assuming there are no external factors that delay the process for transactions between EUR 100k and EUR 1.5m we can generally reach an investment decision and a term sheet within 2-3 weeks of our first conversation. For transactions larger than this amount it is usually around 6 weeks.
Our process is designed to ensure founders and management need not be distracted by the incessant email requests of a due diligence process. And we usually go out of our way to base our decision on information the company already has to hand. Typically most of the information we require to make our investment decision is in a standard investment deck and dataroom. Aside from the commercial information, the key documents we will need to review are the investment deck, the cap table and the shareholders agreement.
Many shareholders agreements contain pre-emption rights and whatever they are they must be followed. We will of course need to understand them before we commit down any path.