137 does it differently, raises new fund

Growth investor 137 Ventures raised $350m for its latest and largest fund, showing again that providing liquidity to founders is a viable investment strategy.

San Francisco growth-stage investor 137 Ventures has closed on $350 million for the largest fund in its 10-year history.

In closing, 137 Ventures announced that the vehicle was oversubscribed and included new and existing LPs.

The fund is 40 percent larger than its previous effort – a $250 million vehicle that closed in early 2019 – and comes as the firm demonstrates that providing liquidity to founders is a viable and productive investment strategy.

The firm, which participates in some direct equity financing rounds, primarily provides loans to founders and early employees at fast-growing private companies in exchange for shares. Some of the largest companies in its portfolio in terms of fair market value are SpaceX, Gusto, Flexport, Workrise and Curology. The firm was also an investor in Airbnb, Coupang, Palantir and Wish. in all, seven of its portfolio companies have raised IPOs in the last 14 months.

The advantage to founders and senior executives is that they can obtain liquidity through 137 Ventures as their companies stay private longer while still preserving their voting rights. There’s also no adverse impact on the company’s 409A valuation.

The way 137 Ventures does it is very different, Nat Fraser, executive director at Agility Outsourced Chief Investment Officer, told Venture Capital Journal. Agility, which works with endowments, foundations and family offices, is a new investor in 137 Ventures.

“137 Ventures is helping founders at fast-growing tech companies with their own financial needs,” Fraser said. “They can provide founders a nuanced solution to their personal liquidity requirements while giving their investors exposure to great companies minus the competitive dynamics you see in traditional VC.”

The origin of 137 Ventures began when co-founder Justin Fishner-Wolfson and S Alexander Jacobson met while working at Founders Fund. In 2010, friends at Facebook were paper-rich but seeking advice on how to obtain liquidity to purchase homes or repay student loans. Meanwhile, companies were staying public longer, and Facebook would not launch an IPO until 2012, about eight years after it was founded.

When Fishner-Wolfson realized such liquidity solutions did not exist, he and Jacobson left Founders Fund to create 137 Ventures.

Fishner-Wolfson identified the need early for how to provide capital to tech founders and employees in a structured way, Fraser noted. Though his organization came in as an LP in Fund V, he said they’ve followed the firm for some time.

“The firm has done what they said they were going to and it’s been great seeing that strategy of theirs take shape and play out over time,” he said.

With its latest fund, 137 Ventures expects to use the same investment strategy as it employed for its previous four funds, providing liquidity solutions to founders, executives, early employees, and other large shareholders of high-growth tech companies.

The firm said that Fund V will also make small investments in primary rounds.