General Electric wants sell off its venture capital arm
General Electric is seeking to turn off the lights at its venture capital arm, which has invested in hundreds of companies since being founded in 2013.
Driving the news: CNBC's Christina Farr reported yesterday that GE Ventures "has been shopping itself for several months and is in discussions with other venture firms as well as groups of limited partners who invest in those funds," with Lazard managing the process.
- Axios has learned that GE approached investment banks last summer, eventually picking Lazard, and that prospective buyers were first contacted in early 2019. At the time, it was a package of nearly 100 companies with a net asset value of approximately $500 million.
- It's not considered to be a particularly strong portfolio, per multiple sources who have seen it.
Context: Venture capital generally sells at a discount to buyouts on the secondaries market, and corporate venture often sells at an even deeper discount because buyers don't share in any strategic synergies. For GE Ventures, that could be anywhere from a 20% to 50% haircut, if it can find a buyer at all.
- Some of the pricing pressure is the byproduct of a relatively small universe of secondary firms interested in venture capital, and an even smaller number with enough capital to do such a large deal on their own.
- That means GE likely not only needs a lead investor, but also that investor's limited partners to co-invest.
Between the lines: There's also is talk that some GE Ventures staffers are pitching portfolio slivers that they'd continue to manage, but it's unclear if such talks are sanctioned by GE.
The backdrop: Until recently, there really wasn't much transaction history for direct VC portfolios valued in the hundreds of millions. But then NEA sold a big basket to a Goldman Sachs-backed fund led by a former NEA partners, and Greenspring Associates quietly led the acquisition of a top-heavy portfolio from Altos Ventures that included unicorns like Roblox and Bluehole.
What to watch: I asked a GE spokesperson if the unit is still making new investments, and specified that I wasn't asking about follow-on deals for existing portfolio companies. Her reply:
"While we are evaluating strategic options for GE Ventures we are focused on actively supporting our portfolio companies."
The bottom line: GE Ventures is effectively dead, because it doesn't have a checkbook to do new deals. The only question now is where it gets buried.
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