Daniel Loeb, the hedge fund manager best known for bruising activist battles at public companies, is turning his hand to venture capitalism.
Mr Loeb’s Third Point is raising its first dedicated venture capital fund, targeting as much as $300m for the vehicle, according to people briefed on the matter. Third Point is aiming to complete its first round of fundraising as soon as February, the people said.
The new fund is the latest example of a hedge fund manager moving deeper into Silicon Valley as public market investors seek new sources of returns in private markets.
Mr Loeb will be the sole general partner of the new fund, which will also be led by Robert Schwartz, a Silicon Valley-based managing partner who has overseen Third Point’s venture investments since 2000.
“We continue to be in the relatively early stages of a continued period of innovation, growth and change — and the need for capital to fuel those businesses,” Mr Loeb told the Financial Times. Third Point declined to comment on the fund, citing regulatory restrictions.
The disclosure comes as Mr Loeb has taken a nearly $1bn stake in Intel and urged the chipmaker to consider shedding its struggling manufacturing operations.
The amount raised by almost 230 US venture capital funds in the first three quarters of this year
Third Point will enter an exuberant market for venture capital, fuelled by years of low interest rates in developed markets and a recent run of big initial public offerings from companies including accommodations booking platform Airbnb and data analytics company Snowflake.
Almost 230 US venture capital funds raised $56.6bn in the first three quarters this year, according to PitchBook data, already surpassing last year’s total despite the coronavirus pandemic.
Mr Loeb is perhaps best known in Silicon Valley for an activist campaign he waged against search company Yahoo, which led to several management changes including the hiring of former Google executive Marissa Mayer as chief executive.
Mr Loeb told the FT he had some reservations about dual-class share structures that concentrate power with start-up executives, an arrangement that has proliferated as venture capitalists court founders.
“The standard multiple share class configuration on a lot of these new companies ultimately will hurt their valuations,” Mr Loeb said.
Third Point’s hedge funds have been investing in private start-ups for two decades, but the new fund would be its first standalone vehicle for the investments.
Mr Loeb hinted at his ambitions in an October letter to investors, writing that advancements in artificial intelligence and the “digital enterprise” had created opportunities “to pursue with dedicated capital”.
The letter said Third Point’s venture investments since 2015 had generated returns that would rank in the top decile of venture funds that began investing that year, citing PitchBook data.
Third Point ranked as the largest outside shareholder in the digital lender Upstart, which reached a market capitalisation of $3bn following its initial public offering this month. Its hedge funds have also invested in asset-backed securities and pass-through certificates tied to Upstart loans.
Another company in Third Point’s venture portfolio, the cyber security firm SentinelOne, was valued at $3bn following an investment led by Tiger Global Management in November.
Mr Loeb wrote in the letter that Third Point owned about 10 per cent of the company after first investing in 2015, and he expected it to go public in the next 12 to 18 months.