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Section Partners raises USD74m for Fund III

Section Partners, which provides creative financing solutions for stock and option holders of late-stage, venture-backed private companies, has closed a third fund with commitments totalling USD74 million.

Investors include a global fixed income investment manager, family offices, and individual investors, including a number of prominent venture capitalists and Silicon Valley tech executives.
 
Section Partners manages funds with committed capital in excess of USD120 million that have completed more than 70 transactions with stockholders of over 30 companies since inception in 2014. Exits to date have resulted from the IPOs of Box, DocuSign, Domo, Lending Club, MongoDB, Pivotal Software, Upwork and Zuora and from the acquisitions of GitHub by Microsoft, Lithium by Vista Equity Partners, SOASTA by Akamai, and Telogis by Verizon.
 
As leading venture-backed private companies wait longer than ever to complete an IPO or other liquidity event, the needs of individual stock and option holders for financing solutions to address personal liquidity needs, including those related to option exercise, have become acute. Secondary sales, which are an increasingly accepted component of the venture-backed company equity compensation model, address but do not fully satisfy these needs.
 
Section Partners provides structured financing solutions that enable stock and option holders to leverage their equity holdings to obtain cash financing in a tax-efficient manner that typically does not involve a sale of shares. The firm’s solutions are designed to be company-friendly and typically do not require a transfer of shares or have any impact on a company’s 409A valuation.
 
“The venture capital industry is built on a foundation of the aspirations of individuals and teams engaged in entrepreneurial projects. Founders, executives and employees of private, venture-backed companies are motivated by the opportunity to help build important new products and companies and to participate in the value and wealth creation inherent in the endeavour,” commented Dave Crowder, Co-Founder and Managing Partner of Section Partners. Crowder further stated: “As the venture industry has grown and matured, venture-backed companies have more access to private capital than ever before, and they often choose to build their businesses for many years before pursuing an IPO or sale of the company. As a result, individual stock and option holders face numerous challenges created by the extended period of illiquidity in their sweat equity holdings. Section Partners has developed proprietary financing solutions that offer venture-backed company founders, employees and investors a compelling alternative to a traditional, tax-inefficient secondary sale.”
 
Fund III is the largest raised by Section Partners to date, and the firm will use its increased capital base to expand its business by transacting with more stockholders of a given portfolio company and with stockholders of more companies in Silicon Valley and beyond. In connection with the closing of Fund III, the firm has brought on board Amrith Ravi and Mow Wong as Venture Partners, who are based in New York City and will target transactions with stockholders of venture-backed companies based on the east coast.

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