Cendana and Kline Hill secure a new $105M fund to acquire stakes in seed VC funds from LPs seeking to divest

The primary challenge in venture capital today, according to investors, is the lack of liquidity. Despite investments in startups or VC funds appreciating in value, the scarcity of IPOs means that these investments aren’t yielding significant cash returns. Private investments, unlike public market investments, offer limited opportunities for selling shares. Private companies must authorize existing investors to sell their shares in secondary sales to approved buyers.

Cash-strapped venture investors, including both VCs and their limited partners, are increasingly seeking to offload their illiquid positions to secondary buyers. Complicating matters is the fact that many early-stage startups were overvalued during the fundraising frenzy of 2021, resulting in shares that may now be valued lower. This creates a unique opportunity to acquire stakes in seed-stage VC funds and shares in startups at discounted prices.

Cendana Capital, a fund of funds investing in seed-stage venture firms, and partner Kline Hill Partners, specializing in purchasing previously owned private assets, have announced a new $105 million Kline Hill Cendana Partners fund, exceeding their initial $75 million target.

Michael Kim, founder of Cendana Capital, noted that over the past two years, portfolio funds have expressed interest in selling commitments, presenting an opportunity to acquire ownership in venture funds and startups at discounted rates. Given the expertise required for investing in secondary assets, Cendana Capital collaborated with Kline Hill for this endeavor.

Kim highlighted the ease of raising funds for this initiative, as existing limited partners expressed interest in capitalizing on the buyer’s market. The process involved gathering commitments from both Kline Hill and Cendana’s existing LPs.