Pegasus runs 20 single-LP funds so corporations can outsource their VC arms

Everyone wants a piece of the venture game, corporations included — but running a corporate venture arm is easy to get wrong. Scott Lenet, president of Touchdown Ventures, told Crunchbase News that starting a corporate fund without experienced investors at the helm is like handing kids the car keys without driving lessons. Working with an external manager, he argued — as a passive LP or with a controlling interest in a third-party fund — is a way to limit the financial downside.

Pegasus Tech Ventures turned that caution into a product it calls 'venture capital as a service'. Founder, GP and CEO Anis Uzzaman said the firm managed 23 funds, 20 of them funded by single limited partners — corporations each getting a dedicated fund — with total assets of about $600 million. Since starting in 2011 it had made more than 140 investments, mainly Series A checks around $5 million, through its various funds.

The structure solves a trust problem as much as a competence problem. As entrepreneurs grew disenchanted with corporate investors over potential conflicts of interest, Lak Ananth, CEO of Next47, said corporations turning to third-party firms to manage their investments was a growing trend, if still uncommon. Uzzaman noted one startup was powered by three different corporate funds under the Pegasus umbrella — part of its appeal.

The tradeoff, per Lenet: the model may decrease risk at the expense of control and of the valuable direct interactions with startups that a hands-on corporate investor gets.

One umbrella, 23 funds, 20 of them single corporate LPs: each corporate gets its own fund, professionally managed, with a degree of separation from the startups.

In-house corporate funds without experienced investors tend to lose money.

Founders increasingly distrusted corporate investors because of potential conflicts of interest.

Single-LP funds give each corporate a dedicated portfolio while Pegasus manages conflicts and pace.

Passive or third-party structures cap the financial downside for the corporate backer.

Outsourcing the machinery of a corporate VC arm keeps the upside and the optionality while quarantining the conflicts that make founders avoid corporate money.

As of May 2019 Pegasus reported about $600 million under management across 23 funds — 20 single-LP — and more than 140 investments since 2011, concentrated in $5 million Series A checks. Lenet cautioned the model trades away control and direct startup relationships; Ananth observed corporates outsourcing to third-party managers was growing, though still uncommon.