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What the White House Order on 401(k)s Could Mean for Venture Capital
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Good day. Last week, President Trump signed an executive order that calls on federal agencies to determine the regulatory changes needed to give more Americans access to alternative assets—private equity, cryptocurrency and private real estate—via their 401(k) retirement plans. Though venture capital wasn’t specifically mentioned, as part of the alternative-asset universe it is seen as implicitly included.
Shane Goudey and Mathew Eapen, partners at the Sidley Austin law firm, said the practical outcome of the order will only become clear once new regulations emerge and market participants decide how to best take advantage of them. Excerpts from our conversation follow:
WSJ Pro: Why were venture-capital assets previously excluded from 401(k) funds?
Goudey: Previously, venture-capital assets were generally excluded from 401(k) investment options primarily due to concerns related to fiduciary responsibilities of plan managers under Erisa [the Employee Retirement Income Security Act of 1974] laws. VC investments are typically long-term and illiquid, and thus they cannot be easily converted to cash, which poses potential challenges for plan participants who might need access to their funds for loans or withdrawals due to life events. Second, VC fund interests are not priced daily and their valuation can be complex and subjective. Third, venture fund investments often come with higher fees, potentially impacting returns and increasing litigation risk for plan fiduciaries.
WSJ Pro: Will this order enable people to invest in VC funds via their 401(k) funds?
Eapen: The executive order itself does not immediately authorize direct participant access to VC investments. Instead, it initiates a regulatory process to clarify how such allocations could happen. It potentially paves the way for venture-capital exposure within 401(k)s, but widespread implementation will take time and depend on how agencies, plan sponsors and asset managers translate guidelines into structured, fiduciary-compliant investment vehicles.
WSJ Pro: What practical changes could venture funds see as a result of this order?
Eapen: This could open the door for venture-capital firms to tap into a new and vast source of capital. To do so, though, fund managers will likely need to adjust their fund structures to comply with revised Erisa standards, and may require changes to liquidity terms, valuation practices and fee transparency. This shift may also pressure firms to lower fees and adopt more standardized reporting practices. Larger venture firms are expected to explore bespoke, regulatory-compliant vehicles, while smaller managers may face barriers due to regulatory complexity and overall administrative burden.
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And now on to the news...
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A view of JMI Equity’s office in Washington, D.C. The firm returned some $5 billion to earlier fund investors through 35 full or partial exit deals over the past five years, generating investor support for the new vehicle. PHOTO: SAM KITTNER
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New fund. Software-focused private-equity firm JMI Equity has raised a quick $3.1 billion for its 12th main fund, the firm’s first since it completed a leadership transition.
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The firm wrapped up JMI Equity Fund XII in less than six months, with the fund closing on 29% more capital than its $2.4 billion predecessor. Almost all of the investors that backed the previous fund pledged commitments to the new vehicle, according to Managing Partner Peter Arrowsmith.
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Investors that have disclosed commitments include the Kansas Public Employees Retirement System, Massachusetts Pension Reserves Investment Management Board and New Mexico State Investment Council.
Read the full article here.
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$30 Billion
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The Trump administration is preparing to sell stock in mortgage giants Fannie Mae and Freddie Mac in an offering it believes could raise around $30 billion and kick off later this year.
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Silver Lake Invests $400 Million to Tackle Data-Center Power Bottleneck
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Private-equity firm Silver Lake Friday announced a $400 million project aimed at securing powered land it will sell to data-center developers and hyperscalers. The new platform is a joint venture between Silver Lake and Adam Fisher and Peter Rumbold, principals at Commonwealth Asset Management, who have invested in data-center land projects for nearly a decade.
Read the article here.
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AE Industrial’s Bet on Rocket Maker Firefly Soars in IPO
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AE Industrial Partners’ investment in space and defense technology company Firefly Aerospace just ballooned into a roughly $3.5 billion wager after the company’s shares climbed in their debut Thursday. Firefly, which successfully landed a spacecraft on the moon in March, saw its stock surge 34% to close at $60.35 after pricing at $45. The gain put Firefly’s market value north of $8.4 billion, lifting the value of the private-equity firm’s stake—on paper.
Read the article here.
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People
Bain Capital Ventures promoted Abby Meyers and Ron Miasnik to partner.
Exits
Cybersecurity company SentinelOne agreed to acquire generative AI security startup Prompt Security. Jump Capital led Prompt’s $18 million Series A round last year.
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Apreo Health, a Menlo Park, Calif.-based startup developing a novel treatment for severe emphysema, closed a $130 million Series B round co-led by Bain Capital Life Sciences and Norwest.
Tavily, a New York-based platform powering real-time search for AI agents, emerged from stealth with $25 million in funding, including a $20 million Series A round led by Insight Partners and Alpha Wave Global.
Docyt, a Mountain View, Calif.-based AI-powered accounting automation provider, added $12 million in new funding led by Pivot Investment Partners.
Perle, an AI training data platform powered by Web3, closed a $9 million seed round led by Framework Ventures.
Tracelight, a U.K.-based AI engine for complex financial modeling in Excel, was seeded with a $3.6 million investment led by Chalfen Ventures.
Ostra Security, a Minneapolis-based managed security provider, added $2.6 million in Series A funding, bringing the round total to $9.5 million. Investors included General Catalyst and Rally Ventures.
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Robby Starbuck, Mark Zuckerberg. PHOTO: SEAN SMITH FOR WSJ; GODOFREDO A. VASQUEZ/ASSOCIATED PRESS
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Khosla Venture’s Rabois on how AI is changing everything about startups (The Information)
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European VCs are raising more specialist defence funds. Is it a good idea? (Sifted)
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