Venture Capital: Goldman Sachs To Raise A $2B Tech Venture and Growth Fund
The investment bank plans to start fundraising next year.
According to the Economic Times, which quoted Bloomberg, Goldman Sachs Group (NYSE: GS) is mulling the flotation of a technology-focused venture and growth fund worth $ 2 billion.
It’s early days yet, and the size of the fund could materially change according to Bloomberg’s sources who preferred to remain anonymous. If successful, the fundraising would place Goldman Sachs in that rarefied group of venture capitalists that have billions of dollars worth of investments targeted for promising start-ups.
Currently, the top players include firms such as the SoftBank Group’s Vision Fund, Tiger Global Management, Sequoia Capital, and TCV.
New and re-organized structure of Goldman Sachs investing division
Growth stage and venture investing is one vertical in the investment bank’s newly reorganized merchant banking division. The others are credit, infrastructure, real estate, and private equity.
The growth investing team already has $8 billion under its management. Its investments include profitable transactions such as in Uber Technologies (NYSE: UBER) and Plaid Inc.
However, Goldman Sachs is pivoting from investments on its own balance sheet to investments for its clients through large funds. These would generate substantial management fees.
Last month, according to a Reuters report, the Goldman Sachs Merchant Banking Division commenced fundraising worth $ 17 billion for private credit investments and special situations transactions.
“We accelerated the marketing of a new credit fund called West Street Strategic Solutions as a part of our transition to fund-driven investing,” said David Solomon, the firm’s chief executive officer, on the bank’s second-quarter earnings call. “Client receptivity has been very strong.”
Interestingly, the start-ups in which the venture capital fund would invest may perhaps, at some stage, want to go public. This IPO business could generate lucrative revenue for Goldman Sachs’ investment banking division.
The proposed fund strategy
According to Bloomberg’s sources, Goldman Sachs would perhaps encourage its high net worth clients to come in as limited partners in the new venture and growth fund.
An investment by the new fund may be in the range of $ 30 million-$ 200 million.
However, the average ticket size of an investment would be about $ 50 million.
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