Brookfield and Sequoia offshoot launch fund to target cut-priced startups

financialpost.com:

Brookfield Asset Management Inc. and Sequoia Heritage, a US$16 billion fund that manages the wealth of Silicon Valley, are creating an investment vehicle to capitalize on plunging valuations of venture capital-backed companies.

The firms are investing US$250 million 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 credit 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 US$2 billion for its first 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 startups 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 startups 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