Turbine Unveils $22M Funding to Offer Liquidity to VC Investors
Addressing the Liquidity Challenge in Venture Capital
In recent years, the slowdown in initial public offerings (IPOs) has left limited partners (LPs) in venture capital funds grappling with a major challenge: a lack of liquidity. This issue has been particularly pronounced for wealthy individuals and small family offices that have committed significant capital to VC investments but struggle to access cash when needed.
Entrepreneur Mike Hurst faced this predicament firsthand. After selling his payments startup, Exactuals, to City National Bank in 2018, he allocated a significant portion of his proceeds to tech stocks and venture funds. However, when tech stocks plummeted in 2022, Hurst found himself in a difficult financial position.
“Firms kept coming for capital calls and new investments. I wanted to make them, but I didn’t want to mortgage the house, take a margin line or sell Amazon at $90 when I knew it was going back to $210,” he told TechCrunch.
The Birth of Turbine: A Credit Solution for LPs
This experience led Hurst to conceive a financial product that would allow LPs to borrow funds using their venture fund stakes as collateral. The result was Turbine, a debt platform designed to provide liquidity to limited partners in private equity and venture capital.
On Friday, Turbine officially emerged from stealth mode, announcing that it has raised $22 million in equity funding. The round was co-led by Alpha Edison and TTV Capital, with participation from Fin Capital, B Capital, and Sozo Ventures. Additionally, the company secured up to $100 million in debt financing from Silicon Valley Bank to support its lending operations.
How Turbine Works
Turbine functions similarly to a home equity line of credit, where an LP can leverage the appreciated value of their fund stake to access capital. For instance, if an LP’s initial $3 million investment in a venture fund has grown to $10 million, they can use that $10 million valuation as collateral for a loan.
Gardiner Garrard, co-founder and managing partner at TTV Capital, was immediately intrigued by the concept when Hurst pitched it to him.
“I had many incidents where an LP approached me, asking about liquidity,” Garrard said. However, traditional options were limited. Selling stock in a portfolio company on the secondary market was an option, but it often meant parting with an asset prematurely to benefit just one LP. Alternatively, LPs could sell their stake in a fund, but those transactions typically come with significant discounts.
Competitive Interest Rates and Future Growth
Turbine claims to offer a more attractive alternative, allowing investors to unlock liquidity without sacrificing future gains. However, these loans come at a cost—currently carrying an interest rate of around 9%. While this rate is higher than the prime rate of approximately 7.5%, Garrard contends that it remains a “very reasonable rate and a lot cheaper than the cost of selling” a stake at a discount in the secondary market.
Turbine’s first clients include the five venture firms that backed its equity raise. General partners at these firms have already begun offering LPs access to Turbine’s credit platform, with plans to expand to additional VC funds following this announcement.
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