Friday Letter: Investors take advantage of opportunity funds

The number of examples of early-stage firms raising or talking about creating separate opportunity funds is increasing, which we explore in our latest analysis story.

We’re nearly halfway through 2021 and a year-and-half into the pandemic, and one thing is certain: the venture world is full of adaptable professionals.

The effects of the pandemic have hit a lot of families hard, and the toll of more than 600,000 lives lost in the US is sad beyond belief. But the silver lining is that the venture community is coming out of this summer at full speed and focused on growth.

That brings me to our latest analysis story on opportunity funds (read it here). The story is a collaborative effort by the staff of Venture Capital Journal, and it explores how rising valuations and other factors are giving lift to the alternative strategy of opportunity funds as more early-stage venture firms add an opportunity fund to their suite.

Since we wrote that story, the number of examples of opportunity funds raised or filed with the SEC have only increased.

One example is the Canadian venture firm Version One, an early investor in Coinbase. The firm announced in early June their second opportunity fund, barely a year after debuting their original effort.

In announcing their second opportunity fund, the firm said that the strategy lets them “double down on our winners and gives us the ability to partner with our founders in their later financing rounds.”

That’s it – as straightforward as it can be. And LPs are so far responding positively as times are good and valuations continue to soar.

However, we found there is some hesitancy about having to shell out more commitments to the stapled-on funds, as we report.

I can’t help but think opportunity funds might not be taking hold right now if the venture community didn’t adapt so well and press on amid a recession and a pandemic.

Tell me what you think, because we’re not done covering opportunity funds. Drop me a note at agoldfisher@buyoutsinsider.com.