Transform Capital's $100M fund will share returns with nonprofits

Venture capital firm Transform Capital is raising $100 million for a growth fund that seeks to inspire more philanthropy in venture capital by committing a portion of returns to nonprofit organizations that its LPs choose.

Why it matters: Many investors claim to be "doing well by doing good," but few have built philanthropic giving into the actual structure of their fund.

How it works: Many impact funds seek to make a difference by investing exclusively in mission-driven companies. Transform Capital is taking a different approach.

• Unlike the usual 80-20 split with LPs, the general partners — former BlueRun Ventures GP Jonathan Ebinger and serial entrepreneur Aihui Ong — are giving up half of their carry and committing 10% of any returns to causes that their limited partners care about whenever there is a liquidity event.
• "For [LPs], it looks like a 90-10 fund," Ebinger tells Axios. "We moved the 10 points of carry we're donating to the LP side, and we pay that out on a deal-by-deal basis, versus waiting until the entire fund is paid back."

Between the lines: With $100 million expected at the fund's close, its general partners plan to invest in 30 companies and are targeting a 3x return.

• But you won't see Transform Capital leading investments or taking big, early bets on unproven companies. Instead, it plans to invest exclusively in late-stage companies with a high likelihood of an exit.
• "This fund writes smaller checks into larger syndicates," he says. "We're not looking for ownership — we're looking to invest in the best later-stage companies, which have oversubscribed rounds we can get into through the mandate we have around philanthropy."

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