By Echo Wang
NEW YORK (Reuters) – Portage Ventures is seeking to raise up to $1 billion for a structured equity fund that will focus on financing startups in the financial technology sector that are reluctant to take a hit in their valuation amid the market downturn, people familiar with the matter said.
The fund will be a so-called structured equity fund, investing in securities that combine debt and equity features and do not require startups to lock in a valuation as with traditional equity fundraising.
Startups have been reluctant to launch traditional fundraisings in the financial downturn because they would be forced to accept a lower valuation than their previous funding round.
Valuations of fintech companies have tumbled this year in a broad stock market sell-off. Swedish payments firm Klarna Bank AB dropped 85% in valuation this year, while BNPL rival Affirm Holdings Inc has shed more than 80% of its value this year.[L8N2YS34N]
Portage is aiming to raise $750 million to $1 billion for the fintech-focused fund, with a $200 million capital commitment, the sources said. The firm is expecting to reach a first close for the fund in November this year, the sources added.
The Toronto-headquartered venture capital firm started discussing its planned Portage Capital Solutions Fund (PSC) with investors about a year ago, one of the people said.
PSC will provide capital in the fintech space in the United States, Canada, and Europe, aiming to invest in companies with a valuation over $500 million and with $100 million to $200 million in revenue, the sources said.
The fund also aims to provide a capital solution for cash-strapped publicly listed companies whose shares have plunged, according to the sources. It can offer a so-called private investment in public equity (PIPE) that is less dilutive to companies.
Veteran investors Daniel Ballen and Devon Kirk will co-lead the strategy for Portage, the sources said.
Portage is a subsidiary of multi-strategy alternative asset manager Sagard. Portage announced last week that it has closed on $655 million for its third flagship fund, the largest to date. It plans to invest in seed through Series C stage fintech in the United States, Europe and Canada.
(Reporting by Echo Wang in New York; Editing by Robert Birsel)
