A Primer on EquityZen’s Multi-Company Funds

Investing in the private markets can be tricky, especially when it comes to researching private companies and gaining access to the information needed to make informed investment decisions. One way investors can gain exposure to a more diversified basket of private companies is through Multi-Company Funds.  

EquityZen’s Multi-Company Funds provide private market access through a single investment with comparatively lower investment minimums¹. These Funds allow investors to invest in minimum amounts of $20,000 and gain exposure to as many as 25 distinct late-stage growth companies. The diversified exposure offered by these funds permits investors to spread their risk across a variety of companies or sectors, thereby mitigating the risk of any one company underperforming and supporting a potentially more stable return on investment.

Each of EquityZen’s Multi-Company Funds has its own Investment Committee, responsible for conducting due diligence and choosing investments for a given Fund portfolio. The Investment Committee conducts weekly reviews of investment opportunities that are sourced through EquityZen’s marketplace and supported with in-house research.

EquityZen’s Multi-Company Funds are structured with shorter expected investment periods (one year) versus most other private equity funds (2-5 years) and have a shorter term (5-7 years) than the typical 12-year term for private equity funds. This provides a potentially more flexible investment option for investors who may not want their capital locked up for extended periods.

Multi-Company Funds provide a way for investors to access multiple companies in the private market with one investment, without having to independently select individual portfolio companies. For accredited investors seeking a more diversified exposure to the private markets and access to a particular industry or theme, EquityZen’s Multi-Company Funds are an investment option made available through EquityZen’s platform.

Frequently Asked Questions

What are the different types of Multi-Company Funds offered by EquityZen?

EquityZen offers two types of Multi-Company Funds:

• • Diversified Funds
    • Target to invest in between 15 and 25 companies or securities
    • Provide investors with diversified exposure via a single investment.
    • Investments are chosen by the respective Fund’s Investment Committee
  • Sector-Specific Funds
    • Target to invest in between 3 and 6 companies or securities in a particular industry sector or theme.
    • More concentrated than Diversified Funds; performance is largely based on market and economic factors that may be unique to the investment theme (as well as individual investment performance).
    • Majority of investments are chosen from a pre-determined target list of companies, made available to prospective investors before committing to the Fund, by the respective Fund’s Investment Committee.

What are the characteristics of Multi-Company Funds?

• • Shorter Term
    • Fund Term of 5-7 years vs an average 12-year term at typical private equity and venture capital funds.²
  • Faster Deployment of Capital
    • 100% of Capital Commitments are called upfront which allows for quicker capital deployment.
  • Shorter Investment Periods
    • Capital is typically invested into portfolio companies within one year, compared to in 2-5 years for typical private equity and venture capital funds.²
    • Faster capital deployment, though not guaranteed, could result in a quicker return on capital.
  • Strong Deal Flow
    • Leverages the strength of EquityZen’s marketplace to source a robust list of potential investment opportunities.
    • Strict guidelines mean that only a subset of investment opportunities are selected for the fund.

How long has EquityZen managed Multi-Company Funds?

Since 2015, EquityZen has launched 13 diversified fund series and 14 sector-specific fund series, representing over $75 million in capital commitments.

When can I expect to see a return on my investment? Can I opt to hold onto publicly traded shares if a portfolio company goes public?

Any publicly traded shares received in connection with an exit event are liquidated and then distributed to investors in the form of cash proceeds by the Fund Manager. Since the Funds typically target investments in private companies with exit potential of 1-4 years, investors could see a return on their investment within a year of investing. In general, however, Multi-Company Funds are expected to take approximately 5 years to produce returns, if any, and may take up to 7 years, with no guarantee for any investment or portfolio of investments that an IPO or other exit will occur.

Can I choose the companies in the portfolio?

Multi-Company Fund portfolios are determined by the respective Fund’s Investment Committee, which is typically comprised of three senior EquityZen employees with extensive investment/private markets experience.

Can I exit the fund early?

There are no early redemptions, liquidations or sales of Multi-Company Fund positions permitted by investors. Investors should be comfortable holding a Multi-Company Fund investment for up to 7 years before committing to invest in this product.

How will I be notified regarding portfolio updates?

We issue fund-level portfolio summary reports and individual partner capital account statements to investors on a quarterly basis. We also keep investors informed of any portfolio developments, including any new investments or upcoming exits expected to occur in the portfolio, via email.

What are the risks associated with investing in Multi-Company Funds?

Investing in private companies through Multi-Company Funds may be considered highly speculative and involves a high degree of risk, including the risk of substantial loss of investment, and investors must be able to afford the loss of their entire investment. See EquityZen's Risk Factors for a more detailed explanation of the risks involved by investing through EquityZen’s platform.

Interested in learning about EquityZen's current Multi-Company Funds? Learn more here.

Sources: 

1. What Is the Structure of a Private Equity Fund?, Investopedia, May, 19, 2022
2. Private Equity & Venture Capital Investment Cycle, FundWiser, August 5, 2021

Nothing set forth here shall constitute an offer to sell any securities or a solicitation of an offer to purchase securities in any jurisdiction. Any offer to sell or solicitation of an offer to purchase shall be made only to qualified investors through a private placement memorandum and associated offering documents (“Offering Documents”). The specific terms of an investment are subject to the Offering Documents, which will contain additional information not set forth here, including a description of certain risks of investing, which will be material to any qualified investors decision to invest.