Goldman Sachs has agreed to acquire Industry Ventures, a 25-year-old San Francisco-based investment firm with seven billion dollars in assets under management. The deal was first reported on Monday. It underscores the growing importance of secondary markets and buyouts as traditional venture exits remain sluggish.
The investment bank is paying six hundred sixty-five million dollars in cash and equity, with up to three hundred million dollars more tied to the firm’s performance through 2030. The deal is expected to close in the first quarter of next year, and all 45 Industry Ventures employees are expected to join Goldman.
The acquisition comes as venture funds increasingly turn to non-traditional exits amid a prolonged IPO drought. Earlier this year, Industry Ventures founder and CEO Hans Swildens said that tech buyout funds now account for 25 percent of all liquidity in the entire venture ecosystem. He described this as a huge chunk of liquidity.
Swildens explained that venture managers are being forced to adapt their approach. He stated that just going out and seeing companies, putting them in a fund, and then waiting for an IPO or strategic M&A exit probably will not work anymore. He said that venture capitalists need to start working on alternative liquidity solutions.
He noted in April that at least five major venture funds had hired full-time staff dedicated to manufacturing non-traditional exits, including secondary transactions, continuation funds, and buyouts. He said all the brand name funds are staffing and thinking through liquidity structures.
Goldman is making the acquisition to bolster its five hundred forty billion dollar alternatives investment platform, which the bank has identified as a key growth engine.
Goldman CEO David Solomon said in a prepared statement that Industry Ventures’ trusted relationships and venture capital expertise complement the bank’s existing investing franchises. He said this expands opportunities for clients to access the fastest growing companies and sectors in the world. The statement continued that by combining the global resources of Goldman Sachs with the venture capital expertise of Industry Ventures, they are uniquely positioned to serve the increasingly complex needs of entrepreneurs, private technology companies, limited partners, and venture fund managers.
Industry Ventures says it has made more than one thousand investments, has stakes in more than seven hundred venture firms, and that it boasts an internal rate of return of 18 percent.