Brian Singerman, formerly a general partner at Founders Fund, and Lee Linden, co-founder and managing partner of Quiet Capital, have initiated a new venture capital firm named GPx. They are in the process of raising over $500 million for this fund, with a portion of the capital expected to come from Founders Fund co-founder Peter Thiel.
GPx introduces a distinctive two-pronged investment approach. Approximately 20% of the fund’s capital is allocated to investing in emerging venture capitalists who focus on pre-seed and seed-stage startups. The remaining 80% is dedicated to partnering with these emerging managers to lead later-stage investments, particularly at the Series B level, in their most promising portfolio companies.
This strategy deviates from the traditional venture capital model, where firms typically invest all their capital directly into startups. By incorporating elements of a fund-of-funds model—investing in a portfolio of other funds rather than directly in startups—GPx offers limited partners access to under-the-radar or hard-to-access firms. However, this model often involves a dual layer of fees: those charged by the fund-of-funds and those by the underlying managers.
Despite a 16-year low in capital raised by fund-of-funds firms last year, Singerman and Linden are confident that their personal brands, unique networks, and a strategy that is only partially a fund-of-funds will attract limited partners to invest in GPx.
The venture capital landscape is witnessing a trend where some of the best investors are leaving large firms to establish their own specialized and nimble investing outfits. GPx aims to capitalize on this trend by betting that the next generation of venture capital investors will identify and back strong early-stage companies. This approach allows GPx to co-lead later-stage investments in the most successful portfolio companies of these emerging managers.
A significant challenge for early-stage venture capitalists is maintaining their percentage ownership in top-performing companies during later funding rounds. Due to limited fund sizes, these VCs often struggle to exercise pro-rata rights in Series A, B, and beyond. They may resort to raising special purpose vehicles (SPVs) from existing limited partners, a process that can be time-consuming and may result in losing coveted equity spots to other investors.
With GPx’s backing, emerging funds will have the opportunity to not only exercise their pro-rata rights but also lead later-stage rounds. This support addresses a critical gap in the venture capital ecosystem, enabling early-stage VCs to maintain their stakes in successful companies without the delays associated with raising additional capital.
In summary, GPx’s innovative approach combines direct investments with a fund-of-funds strategy, providing a comprehensive solution for emerging venture capitalists and their portfolio companies. By leveraging the expertise and networks of Singerman and Linden, along with support from established figures like Peter Thiel, GPx is poised to make a significant impact on the venture capital industry.
