Key Takeaways

  • Traditional 10-year fund lifecycles force managers to spend peak deployment years fundraising rather than managing positions.
  • Public closed-end vehicles under the 1940 Act allow managers to tap non-dilutive debt, at-the-market (ATM) equity sales, and private placements without starting new vehicles.
  • Powerlaw Corp. (Nasdaq: PWRL) uses a permanent balance sheet to hold late-stage tech assets indefinitely as private companies stay private longer.
  • Building back-office, regulatory, and administrative operations in-house creates a defensible barrier that prevents fast-following copycats from listing competing funds.

The Structural Flaw in 10-Year Funds

Venture capital has operated on the same timeline for decades: raise a blind pool, invest across five years, harvest for five more, and pray the market gives you an exit window before the fund expires. As mega-cap private tech companies choose to stay private for 12 to 15 years, this 10-year container breaks down.

Benjamin Black realized that running a standard fund forces a manager to start from scratch right when their strategy begins working. “When I started looking at this and then comparing it to a 10-year liquid fund where you have a set of what $500 million of committed capital and then you have to invest that over five years and then it's your fees decline and you can't raise more money for it,” Black said. “I saw that as just like an extraordinary advantage in terms of how to build these portfolios over time.”

Instead of managing a decaying fee base and rushing liquidity to return capital to limited partners, an evergreen balance sheet removes the artificial clock.

Flexible Capital Tools in Public Closed-End Funds

By taking Powerlaw Corp. public under the Investment Company Act of 1940, Black unlocked balance sheet options closed off to private general partners. Private funds must call capital in set tranches. Public closed-end funds can raise capital dynamically depending on market pricing.

“You can put debt non-dilutive debt on the portfolio,” Black explained. “You can do what's called an ATM, an at the market offering, which means you can sell shares into the market if you're trading at a premium to raise additional money that way. You can even do private placements and like raise the money privately and then have it put it into the fund.”

This capital flexibility ends the three-year fundraising cycle that drains GP attention. Black noted: “in year three when I've deployed my capital, I don't have to go raise a new fund. These funds are evergreen. It's permanent capital. And so that we can just sit there and grow the capital base over time without having to go start again with a new fund.”

In-House Operations as a Moat

Operating a publicly traded 1940 Act fund comes with severe regulatory, compliance, and accounting burdens. Most managers outsource these functions to third-party administrators to launch quickly. Akkadian and Powerlaw took the opposite approach by building their administrative and compliance machinery internally.

“So when we think about long-term defensibility so that we can get an outside share of the market compared to our size that's why we built the expertise in house so that it's repeatable that we know every part of it that we have control over every part of it and it was expensive to do that,” Black said.

David Weisburd pointed out that this heavy upfront investment creates a wide moat: “Meaning it built a lot of these competencies inside these hard things that compound with time that maybe don't allow you to go from zero to one as quickly but just massively compound and continue to build enterprise value.”

Why It Matters

This model signals a migration of late-stage tech ownership away from private drawdown funds and toward permanent public structures. As private tech companies delay initial public offerings, closed-end vehicles bridge the liquidity gap for early shareholders while giving public markets direct exposure to private balance sheets without forcing premature sales.