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Situation:
A fund needs follow-on capital to support portfolio companies. Lack of follow on will result in dilution or loss of the investments.
Solution:
The Preferred Annex Fund is a side fund that provides the follow on investments needed by the main fund. In return, the Preferred Annex Fund will receive a preferred distribution on liquidity events of the assets. The preferred distribution resembles liquidation preferences that VCs apply when investing in new rounds. A Preferred Annex Fund brings in new capital, but dilutes the value of existing LPs.
