Goldman Sachs plans new $2bn venture fund to invest in large start-ups

The bank is planning to start begin fundraising efforts next year

FILE PHOTO: A trader works inside the Goldman Sachs booth on the floor of the New York Stock Exchange (NYSE) in New York, U.S., March 7, 2019. REUTERS/Brendan McDermid/File Photo
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Goldman Sachs Group is considering forming a new fund of about $2 billion (Dh7.34bn), a move that would make the investment bank a bigger player in the competitive world of technology investing.

The fund, which is aimed at growth and venture-stage companies, would be one of the biggest in the industry and could give the bank an edge with large start-ups seeking big cheques from investors.

The bank plans to begin raising the capital for the fund next year but talks are still at an early stage and the size of the fund could still change.

A representative for Goldman Sachs declined to comment.

Apart from SoftBank Group’s Vision Fund, which has about $100bn, only a handful of companies have several billions of dollars to invest in venture and growth-stage companies.

However, it is a space that is becoming more crowded by hedge funds and venture companies that have expanded. Tiger Global Management, Sequoia Capital and TCV are among the companies with multibillion-dollar funds for growth-stage start-ups.

Some of Goldman Sachs’ high-net worth clients are expected to be among the limited partners in the fund.

The bank is expected to make an investment of between $30 million and $200m in companies, with an average size of about $50m per deal.

Plans for the new fund come after Goldman reorganised its investment teams last year. Now, most of the bank’s venture investment activities will be consolidated under the merchant bank’s growth equity team.

That team has invested for several years across industries and has more than $8bn under management, according to its website.

Investing in start-ups at different stages could help Goldman Sachs work with some of these same businesses through its investment banking division when they go public.

Goldman Sachs has made a number of growth-stage investments, as well as lucrative bets in Uber and Plaid when they were private.

Uber went public last year while Plaid was acquired for $5.3bn earlier this year.

Goldman still plans to make select early-stage investments off its balance sheet.

The Wall Street company said the expansion of its private investment activities was critical step for its ambitious growth plan that was unveiled at its inaugural investor day earlier this year.

The company intends to manage more money for clients and reduce the level of investment made from its own balance sheet to free up capital and provide a more consistent revenue stream from management fees.

Growth-stage investing is just one of the pillars under its newly reorganised merchant bank and it has already been active in the market with a new credit fund that could raise at least $10bn.

The other investment focus will be on infrastructure, property and private equity funds.