EB Exchange Funds, a San Francisco-based firm designed to reward startup founders with liquidity, expects to close its third fund later this month, founder Larry Albukerk told PEHub.com.
The little-known firm creates a portfolio by inviting entrepreneurs and executives to contribute some of their common stock from their startups to a larger pool, from which they each will receive distributions when any one of the other companies in the pool has a liquidity event. Albukerk expects that at the fund close, the firm will have brought in between 50 and 75 executives nationwide from as many as 35 venture-backed startups.
The new fund comes as VCs look for innovative ways to keep their founders and startup executives happy. The increasing median time to liquidity can be a big problem for first-time founders. Firms such as Tudor Ventures have touted their willingness to provide cash to founders as they go through the investment rounds and The Founders Fund has even designated a special class of stock, called FF, that is designed to offer a little cash to the entrepreneurs before any liquidity event. EB Exchange Funds offers an alternative to VC-sponsored buyout programs.
Albukerk’s first fund, called Eleven Baskets, closed in 1999 and held stock from 11 companies. One of its holdings is San Francisco-based OpenTable, an Internet-enabled restaurant reservation service that some expect to launch an IPO later this year. The firm’s second fund, raised in 2002, had 26 companies represented in the pool. The fund would qualify as “top quartile” when compared to venture funds of the same vintage, Albukerk says. It had 13 liquidity events, about half of which were positive for the fund, Albukerk says.