General Catalyst, one of Silicon Valley’s largest capital firms, is gearing up to launch what’s known as a “continuation fund” worth betwe

General Catalyst is working on a ‘continuation’ fund worth up to $1B, sources say

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2024-10-21 03:00:02

General Catalyst, one of Silicon Valley’s largest capital firms, is gearing up to launch what’s known as a “continuation fund” worth between $800 million and $1 billion, according to a person familiar with the plans.

A continuation fund consists of a portion of stakes that the VC firm has in portfolio companies. With around $25 billion in assets under management as of 2023, General Catalyst’s exact continuation fund portfolio composition is still being determined. However, it will likely include stakes in Stripe, Gusto and Circle, the person said. The firm has recently hired Jefferies as its secondary investment advisor.

Once the fund is established and investors are found for it, General Catalyst’s original limited partners will be offered a choice: sell their shares and cash out, making way for new investors, or stay invested in the continuation fund, a process called ‘rolling.’

While private equity firms have used continuation funds for a long time, the mechanism has only recently grown in popularity with venture capitalists, largely because of the dearth of IPOs and slowdown in M&A activity. This has forced some large venture capital firms to tap the secondary market to return capital to their limited partners.