Base10 has launched a new co-investment program to allow its LPs access to oversubscribed rounds it participates in through its Advancement Initiative growth funds.
“We sized [the Advancement Initiative fund] in a disciplined way so that we can invite LPs to invest at the same price that the fund is initially investing at,” Base10 head of investor relations Iñigo Garcia Gordobil told Venture Capital Journal. “We invite LPs to invest at the same terms and in the same structure, and in the same oversubscribed allocation that we would be winning with our fund.”
Gordobil leads the program alongside partner and head of direct and co-investments Andrew Lebovitz. The co-investment program, dubbed the “premium access program,” was born of Base10’s desire to bring private equity-like co-investment practices to the venture industry. Gordobil, who spent 12 years on the LP side at Cambridge Associates and QIC, said the program will address common frustrations LPs encounter when dealing with venture capital GPs.
“When I was an LP I saw that co-investments were becoming a more significant part of most LP’s private investment strategy, and there was often misalignment between the GP offering the co-investment and me as an LP,” Gordobil told VCJ. “We’re working with our LPs so that they can invest with us in a co-investment experience that mimics the best practices of how private equity co-investments work, and very much aligns the LP with the GP and the fund. To me, that’s what I wanted to see as an LP, and that’s what we’re trying to execute on today as Base10.”
On behalf of HBCUs
Base10 Advancement Initiative I closed on $250 million in 2021, while Base10 Advancement Initiative II raised $444 million in March, according to a regulatory filing. (Fund II has not held a final close yet, the firm said.) Both funds focus on investing in “leading pre-IPO start-ups” and have committed to donate half of their carried interest to Historically Black Colleges and Universities for student scholarships and to support HBCU endowments.
The San Francisco-based firm declined to name investors in the funds, but regulatory filings show that Fund I has 92 investors and Fund II has 113. The State Universities Retirement System of Illinois committed $25 million to each, according to VCJ research. Other LPs in Fund I include the Florida Agricultural and Mechanical University, Henry J. Kaiser Family Foundation, John D and Catherine T MacArthur Foundation, Plexo Capital, Public Welfare Foundation, Silicon Valley Community Foundation, The Community Foundation of Frederick County and The Harry and Jeanette Weinberg Foundation, VCJ research shows.
Despite just announcing the co-investment program publicly, the firm has already executed two such deals. Base10 declined to share the names of the LPs that co-invested, but did say the co-investments were made in the $80 million Series B round it led in healthcare human resources company Incredible Health and its $150 million Series C round in human resources technology company Oyster. Gordobil said the firm has a pipeline of opportunities to “lead a number of $40 million to $50 million rounds” as the program hits its stride.
“[The program] has been very well received because of that alignment of GP and LP interests,” Gordobil told VCJ. “We give them our due diligence, the summaries of our reference calls, how we’re underwriting the deal. Their terms and the structure will be consistent with ours. They basically can underwrite the investment at the same time, with the same information that our growth fund has.”
For the companies that Base10 and its LPs co-invest in, nothing much changes. Gordobil said the co-investment will be backed by the firm via an SPV it creates for each deal. As for what the firm gets out of the program, Gordobil said that it serves a dual purpose.
“The benefit for us is that we want to be a long-term partner to LPs,” he told VCJ. “We also believe that in a market environment like today, having too large of a fund size can actually be detrimental in terms of being disciplined. We could have raised more capital, but having a good co-investment program allows us to be able to call on capital with our partners, giving us the strength to write larger checks but without the pressure of having to write a larger check all of the time.”
This story was updated to clarify that Base10 Advancement Initiative II has not yet held a final close.