To entice their investors off the sidelines, venture capital firms are turning to a tactic used during the dot-com bust: discounts.
Coatue Management recently raised $1.4 billion for a companion fund to its $7.7 billion VC growth fund, according to two people with direct knowledge of the matter. Coatue is not charge existing investors in the growth fund management fees to invest in the companion fund. That saves the backers the roughly 2% fee used to cover the cost of running a VC firm.
The fee cuts, as well as Coatue’s decision to effectively add to an existing fund rather than raise a new one, show how some firms have managed to raise large funds while grappling with one of the most difficult periods for the industry in years. Khosla Ventures, Greylock and Lux Capital have also recently raised billion-dollar funds despite headwinds.