Brookfield and Sequoia offshoot team up to buy distressed start-ups

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Brookfield Asset Administration and Sequoia Heritage, a $16bn fund that manages the wealth of Silicon Valley, are creating an funding automobile to capitalise on plunging valuations of enterprise capital-backed corporations.

The companies are investing $250mn every to discovered a brand new firm referred to as Pinegrove Capital Companions led by Brian Laibow, based on two sources acquainted with the matter. Till lately, Laibow was co-head of the North American operations of Oaktree Capital Administration’s flagship distressed fund.

Brookfield and Sequoia Heritage will every personal a 50 per cent stake within the funding firm, which can also be attempting to draw outdoors capital from giant institutional buyers. The agency hopes to boost greater than $2bn for its fist fund, which is able to put money into privately held corporations which have seen their valuations tumble amid a repricing of venture-backed teams.

Brookfield and Sequoia Heritage declined to remark.

The brand new automobile will reap the benefits of a funding crunch for start-ups and their enterprise capital house owners, who’ve struggled to exit their investments amid a dramatic slowdown in preliminary public choices. Buyers in enterprise capital funds have, in the meantime, discovered it tougher to redeem their cash.

Pinegrove will purchase up stakes in start-ups from enterprise backers who’re below strain to ship returns to their very own buyers, in addition to shares in enterprise funds from folks trying to money out. It would additionally supply some sorts of lending.

Startups in hard-hit sectors equivalent to cryptocurrencies and fintech are buying and selling at reductions of as a lot as 80 per cent, based on members within the secondary market.

Sequoia Heritage was based in 2010 with cash from senior companions at enterprise capital agency Sequoia Capital, together with $150mn every from Doug Leone and Michael Moritz. The agency has since grown dramatically, and secured investments from Stripe co-founder John Collison and former Google boss Eric Schmidt’s household basis.

Sequoia Heritage invests individually from Sequoia Capital. Final month, Moritz stepped down from his position at Sequoia Capital to give attention to his Heritage investments full time.

Sequoia Heritage and Brookfield have change into nearer lately. In January 2022, they entered a “strategic partnership” to construct logistics help for Sequoia China’s investments in native ecommerce start-ups. Brookfield additionally invested in Sequoia China, which is within the means of being spun off from the US agency.

Bruce Flatt, chief govt of Brookfield, and high executives at Sequoia had been launched by Bruce Karsh, the cofounder of Oaktree. He made the introduction shortly after Brookfield acquired a controlling curiosity in Oaktree in 2019.