137 Ventures Raises New Fund for Private Company Shareholders

137 Ventures Closes $350 Million Fifth Fund

137 Ventures, a San Francisco-based firm established a decade ago, provides financing solutions to founders, executives, early team members, and significant shareholders within rapidly expanding private technology companies. In return for this funding, the firm receives the option to convert the debt into equity. Recently, they successfully finalized their fifth fund, securing $350 million in commitments.

Fund Growth and Investment Portfolio

This latest fund represents the largest capital raise in the company’s history. Their previous fund, the fourth, initially closed with $210 million in 2019, and subsequently increased to $250 million.

The firm’s continued success is unsurprising, particularly given its investment strategy which includes occasional small investments in primary funding rounds. To date, 137 Ventures has acquired stakes in approximately 75 companies. Notably, 13 of these companies have completed initial public offerings (IPOs), with seven of those IPOs occurring within the past 14 months.

These successful exits include prominent names such as Airbnb, Wish, and Palantir.

Key Investments and Market Dynamics

137 Ventures’ portfolio also boasts valuable equity positions in companies like SpaceX, Gusto, Flexport, Workrise, and Curology.

Since the launch of their fourth fund in 2019, the five largest investments, based on dollar amount, have been Workrise, Wonolo, Thirty Madison, Anduril, and Lattice.

Accelerated Pace and Increased Competition

A recent discussion with Justin Fishner-Wolfson, a co-founder of the firm, revealed that the current market is characterized by an accelerated pace of activity. This has, in turn, intensified the firm’s operational demands.

He noted a significant increase in the number of companies seeking investment, necessitating an expansion of the 137 Ventures team through ongoing hiring initiatives.

“Numerous conversations are currently underway,” he stated.

The rapid increase in private market valuations has also led to heightened competition. However, Fishner-Wolfson believes that the firm’s established brand recognition provides a competitive advantage, benefiting from a decade of experience in the market.

Maintaining Market Presence

He emphasized that securing deals requires demonstrating value, intelligence, and reliability, especially during challenging times. Furthermore, he acknowledged the need to remain competitive by offering market prices and actively maintaining visibility within the industry.

“It’s essential to stay in front of everyone and consistently work to enhance our profile,” he explained.

Shareholder Liquidity and Early Sales

We inquired about the willingness of employees to sell their shares, considering the substantial valuation increases experienced by many startups. Fishner-Wolfson indicated that employee behavior hasn’t drastically changed.

However, he observed a trend of companies allowing employees and insiders to sell shares earlier in the company’s lifecycle.

Facilitating Insider Sales

137 Ventures is also witnessing more startups implementing processes to facilitate insider sales at an earlier stage. This is likely driven by the need to retain talent, as well as lessons learned from observing other companies, such as Palantir, which had minimal restrictions on trading.

He commented on the mixed results of Palantir’s approach, noting both positive and negative consequences.

Investment Holding Periods and Long-Term Strategy

Fishner-Wolfson estimated that the firm’s average holding period for investments is “six or seven years.” Typically, 137 Ventures waits for a company to go public before initiating the exit of its investment.

Even after a public offering, the firm may retain shares depending on the fund’s lifecycle. The firm’s overarching strategy is to invest in companies poised for exceptional success within their respective industries, with the intention of maintaining those investments for an extended period.