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Brookfield Asset Management and Sequoia Heritage, a $16bn fund that manages the wealth of Silicon Valley, are creating an investment vehicle to capitalise on plunging valuations of venture capital-backed companies.
The firms are investing $250mn each to found a new company called Pinegrove Capital Partners led by Brian Laibow, according to two sources familiar with the matter. Until recently, Laibow was co-head of the North American operations of Oaktree Capital Management’s flagship distressed fund.
Brookfield and Sequoia Heritage will each own a 50 per cent stake in the investment company, which is also trying to attract outside capital from large institutional investors. The firm hopes to raise more than $2bn for its fist fund, which will invest in privately held companies that have seen their valuations tumble amid a repricing of venture-backed groups.
Brookfield and Sequoia Heritage declined to comment.
The new vehicle will take advantage of a funding crunch for start-ups and their venture capital owners, who have struggled to exit their investments amid a dramatic slowdown in initial public offerings. Investors in venture capital funds have, meanwhile, found it harder to redeem their money.
Pinegrove will buy up stakes in start-ups from venture backers who are under pressure to deliver returns to their own investors, as well as shares in venture funds from people looking to cash out. It will also offer some types of lending.
Startups in hard-hit sectors such as cryptocurrencies and fintech are trading at discounts of as much as 80 per cent, according to participants in the secondary market.
Sequoia Heritage was founded in 2010 with money from senior partners at venture capital firm Sequoia Capital, including $150mn each from Doug Leone and Michael Moritz. The firm has since grown dramatically, and secured investments from Stripe co-founder John Collison and former Google boss Eric Schmidt’s family foundation.
Sequoia Heritage invests separately from Sequoia Capital. Last month, Moritz stepped down from his role at Sequoia Capital to focus on his Heritage investments full time.
Sequoia Heritage and Brookfield have become closer in recent years. In January 2022, they entered a “strategic partnership” to build logistics support for Sequoia China’s investments in local ecommerce start-ups. Brookfield also invested in Sequoia China, which is in the process of being spun off from the US firm.
Bruce Flatt, chief executive of Brookfield, and top executives at Sequoia were introduced by Bruce Karsh, the cofounder of Oaktree. He made the introduction shortly after Brookfield acquired a controlling interest in Oaktree in 2019.