The fund was backed by downtown-based Oaktree Capital Management, New York-based Davidson Kempner Capital Management and an undisclosed Northeast Ivy League endowment fund, as well as other undisclosed investors.
Quid was founded in late 2017 as a dedicated fund within Santa Monica-based venture firm Troy Capital Partners, which is led by co-Managing Partners Josh Berman and Anthony Tucker. Quid was spun out into a separate company last fall, although leadership of the two businesses still overlaps.
Quid targets a select group of private technology companies and offers nonrecourse loans to employees on up to 35% of the value of their current shares. It makes money off both a 7% annual interest rate and a “stock fee,” which consists of a predetermined number of an employee’s shares once their company has undergone an initial public offering.
Quid says it has lent to employees of many major tech businesses prior to their companies’ IPOs, including Uber Technologies Inc., Lyft Inc., Unity Software Inc., Palantir Technologies and CrowdStrike Holdings Inc.
Berman said Quid’s main clients are usually longtime employees at fast-growing tech businesses who are wealthy on paper — due to the value of their shares — but who may have limited usable cash.
“A lot of our business is in San Francisco. It’s quite expensive up there,” he said.
Berman raised the example of an Uber employee — prior to that company’s IPO — living in San Francisco who might want to buy a house. “They can’t walk into Bank of America and get a loan against pre-IPO tech shares,” he said.
Historically, according to Berman, selling shares on secondary markets through companies like Forge Markets or EquityZen Inc. has been the only option for pre-IPO tech employees looking to turn their shares into cash.
“The downside to that is, if they sell, they are out of the position,” he said. “They don’t benefit if the stock appreciates.”
Berman said his company is one of the only businesses in California willing to lend against pre-IPO tech shares and is the only player with a dedicated fund and institutional backing in the space.
Berman said Quid’s newest fund would target employees of 20 to 30 technology companies with total loans ranging from $5 million and $30 million per company.
