Turbine, a startup founded by entrepreneur Mike Hurst, has raised a total of $22 million in equity funding to offer a credit product that allows limited partners in venture capital funds to borrow funds secured by their LP position. The company, which is coming out of stealth, has also secured up to $100 million in debt from Silicon Valley Bank to support its loan making.

The idea for Turbine was born out of Hurst's personal experience as a limited partner in venture capital funds. After selling his payments startup Exactuals to City National Bank in 2018, Hurst invested a significant portion of the proceeds into tech stocks and venture funds. However, when the tech stocks crashed in 2022, Hurst found himself struggling to meet his capital calls and new investment commitments without having to mortgage his house or take a margin line.

This experience led Hurst to create a credit product that would allow limited partners to borrow funds using their fund stakes as collateral, similar to a home equity line of credit or a margin line. Turbine's platform provides a way for limited partners to access funds without having to sell their stake in the fund at a discount or give up on the future upside.

The company's offering has resonated with investors, including Gardiner Garrard, co-founder and managing partner at TTV Capital, who led the equity funding round alongside Alpha Edison. Garrard said he was instantly excited about Turbine's solution, which addresses a common problem faced by limited partners who struggle to access liquidity.

Traditionally, limited partners have had limited options for accessing liquidity, including selling their stake in the fund on the secondary market, which often comes with significant discounts. Turbine's platform claims to offer a more attractive solution, allowing limited partners to borrow funds at a rate of around 9% interest, which is still considered reasonable compared to the cost of selling on secondary markets.

Turbine's first customers are the five venture firms that backed its equity raise, and the general partners of these firms are already offering their LPs access to Turbine's credit. The company plans to make its product available to more VC funds following its announcement.

The launch of Turbine's platform is significant, as it addresses a major pain point for limited partners in venture capital funds. With the venture capital industry facing a liquidity crunch in recent years, Turbine's solution is likely to be welcomed by many investors who have struggled to access cash returns.

In the broader context, Turbine's platform highlights the need for innovative solutions to address the liquidity challenges faced by the venture capital industry. As the industry continues to evolve, it is likely that we will see more startups emerging to address these challenges and provide new opportunities for investors to access liquidity.