TLDR:
- Venture capital investors are adding a “portfolio sale clause” to funding round documents to give them more flexibility to sell startup stakes in the future.
- This clause allows VCs to sell their shares without giving other investors the right to block it or sell their own shares at the same time.
In the last year, venture capital investors are facing challenges in making money for their investors due to few startup exits. This has led them to explore secondary sales and fund structures like continuation funds. Recently, some VCs have begun to add a “portfolio sale clause” to funding round documents, giving them more flexibility to sell startup stakes without restrictions. This clause allows VCs to liquidate their whole portfolio without triggering preemption or co-sale rights.
This clause is typically used by funds that have been around for a while and haven’t seen many exits, needing liquidity. While still rare, it could become more common as VCs engage in more secondaries. Despite concerns over allowing one investor to have this clause, it could provide benefits for both parties if negotiated amicably.
