Over the past 20 years, as venture capital morphed from a cottage industry to a huge, institutional asset class, Matt Krna saw some headaches on the horizon.
As investor portfolios accumulated shares of more and more startups, the former partner of Softbank Capital and other VC firms knew investors would need help managing their growing lists of funds and companies — and that was in good times.
Now, after two years of higher interest rates, times are tough: VC fundraising and capital invested are way down, startups are underperforming and thousands could go out of business. Any investors still investing in the asset class are gravitating toward the biggest and best performing VC firms (or at least the biggest ones with the best brands).
As a result, small and midsize VC firms unable to raise new capital — or ones with general partners who are focused on raising capital and finding new startups to invest in — are having an especially hard time. They are going to need help more than ever managing the investments they already made, which is where Krna and his colleagues come in.
Two Meter Capital, which Krna founded in 2024, is a “GP on demand” that takes on venture portfolio tracking and reporting; handles fund administration, auditing and valuation; and acts as a sub-advisor to investors with startup portfolios that need to be analyzed, tuned up, or even liquidated.
“Anyone investing in these kinds of startups, early stage companies to growth stage companies — your portfolio is just by definition going to be much, much bigger and they’re going to become big and kind of unwieldy,” Krna told Institutional Investor.
A couple years after launching and building the business, VC firms are just one type of investor that Two Meter works with. Family offices are seeking Krna’s help to better manage, evaluate and, in some cases, sell all of their VC holdings. PE firms that specialize in secondaries are another group eager to work with it.
“There are certain times where there is an opportunity that is very interesting from an investment perspective, but requires more active management than we as a secondary firm are kind of built to deliver,” said Chris Bull, a managing director at Kline Hill Partners, which has partnered with Two Meter.
In one case, Bull had an opportunity to buy bulk positions in over 180 small companies, an untenably large group for a firm like his. Managing it would have required hiring at least one employee, he said. “For us, the work is really evaluating the investment, making the investment, continuing to monitor, but letting the general partners do their job. And in this case, there was no general partner. So that’s really how we got connected with Matt,” Bull said. “Two Meter is really the interface with the companies and they’re helping us with the financials, overseeing the valuation work and really ensuring that the portfolio is being run in the institutional way that we would expect.”
It might sound like Two Meter, which charges its clients a fee based on a portfolio’s NAV and according to what they need, is doing some of the dirty work required of VC investing — but calling it a cleanup crew would be a misnomer, according to Bull.
Kline Hill isn’t just working with Two Meter to save time or money. Krna and his colleagues give clients suggestions on limiting the downside and participating in the upside of portfolios.
“You may not recognize what is actually a far outperforming asset because it is an interesting moment in time. There are some companies that have struggled to perform against the valuation they received in 2021, but the flip side of that is also a lot of companies that have far outperformed,” Bull said. He added that clients need a lot of detailed analysis of the portfolio and individual companies to make that assessment.
There are individuals who consult for VC investors and effectively step in as a general partner for hire, but Krna said he’s not aware of any independent company bringing the infrastructure and other services to manage portfolios. And, he says, Two Meter can do it at a competitive rate because it also plans to invest in some startups alongside clients.
Still, Two Meter isn’t fighting for allocations — it’s an advisor first.
“That vision of ours in terms of making this more of a hybrid model, it allows us to offer that tech-enabled services piece at fairly attractive rates to family office clients, GP clients, et cetera, because that opportunity to co-invest later on — that has actual economic value for us over time. We expect that’s going to be a meaningful and growing part of our model,” Krna said.