Introduction to GPx
GPx is a new fund launched by former Founders Fund GP Brian Singerman and co-founder and managing partner of Quiet Capital, Lee Linden. They are seeking to raise over $500 million for this fund, with a significant portion of it coming from Founders Fund co-founder Peter Thiel. This fund uses a unique two-pronged strategy to invest in startups.
Investment Strategy
The firm will invest approximately 20% of its capital into funds managed by emerging VCs who are targeting pre-seed and seed-stage startups. The remaining capital will be used to partner with emerging managers on leading later-stage investments, likely at Series B, of their breakout companies. This approach is different from how most venture firms operate, as they typically invest all their capital directly into startups.
Fund-of-Funds Model
GPx is adopting elements of a fund-of-funds model, where a firm invests some portion of its capital into a portfolio of other funds, rather than directly in underlying assets like startups. While this model offers limited partners a convenient way to access under-the-radar or hard-to-access firms, it also has a significant drawback: the dual layer of fees charged by the fund-of-funds and the underlying managers.
Market Trends
Despite capital raised by fund-of-funds firms hitting a 16-year low last year, Singerman and Linden are betting that their personal brands, unique networks, and strategy will encourage limited partners to invest in GPx. As venture capital concentrates in the largest funds, some of the best investors are leaving big firms to launch their own investing outfits where they can be more nimble and specialized.
Benefits for Emerging VCs
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. This strategy becomes particularly valuable for early-stage VCs, who often try to exercise pro-rata rights in later funding rounds but are limited by their fund sizes.
Opportunities for Emerging Funds
With GPx’s capital behind them, emerging funds will have the opportunity to not only exercise their pro-rata rights but also lead a later-stage round. This will give them a chance to maintain their percentage ownership in top-performing companies and avoid the time-consuming process of raising special purpose vehicles (SPVs) from their existing limited partners.
Conclusion
GPx’s unique strategy and approach to investing in startups make it an attractive option for limited partners. By providing emerging VCs with the capital they need to lead later-stage investments, GPx is positioning itself as a key player in the venture capital market. With its focus on partnering with emerging managers and investing in breakout companies, GPx is well-placed to identify and back the next generation of successful startups.
