Some corporate venture spinouts aren’t really spinouts. They move the portfolio and leave the people. The parent decides the fund is no longer core to its strategy, a buyer takes the assets off the balance sheet, and the investment team goes off to do something else.
Sim Blaustein and his partner Urs Cete went a different way. Last year they spun BDMI, Bertelsmann’s venture fund, into a traditional LP-GP structure under the name 1745 Ventures and brought roughly 100 portfolio companies with them. Bertelsmann stayed in as the largest LP at 50%, a sign of how well the relationship held up through the transition after Sim’s 13 years there.
Sim walked me through how the case took shape inside Bertelsmann, why he treated outside interest as leverage rather than an offer, and what he and his partner Urs had to work out once everyone agreed to do the deal.
Cash discipline first, and Sim says that was the good part
BDMI operated like a financial fund inside a media company. Bertelsmann treated it and its sibling vehicles as financial investments first, which meant real discipline around deploying cash. A deal couldn’t simply be attractive or interesting; it had to clear the investment bar. Sim came to see that constraint as one of the best parts of the job.
The approach paid off. Sim points to a string of exits, including BarkBox going public through a SPAC and a crypto position that became liquid through a distribution and generated a meaningful return.
But that same structure had one substantial drawback.
“We never actually had a real fund. We never had true ownership in our fund. We had sort of a synthetic carry, which gave us the equivalent of profit participation.”
Sim is quick to point out the tradeoff cuts both ways. Unlike a GP raising a traditional fund, he never had to go out and fundraise from LPs himself, something he says he took for granted until he started doing it.
“When you get paid a bonus working for a company… you see about half of it go off to Uncle Sam.”
Carried interest gets favorable tax treatment, as do gains on qualified small business stock (QSBS). A bonus doesn’t, and Sim is candid that the gap helped make the case for building something of his own. The other part was having his own money at work. Conversations with Bertelsmann had been going on for years and were always well received. Sim described it as “a long-simmering idea,” but nothing forced the issue until a few things lined up at once.
What finally moved the conversation
Performance was the prerequisite, but the actual opening came from a shift in Bertelsmann’s own mandate for the fund. Executives turned over, corporate priorities moved, and it became clear that Bertelsmann’s expectations for BDMI were changing around stage and investment type. Sim and Urs pushed on the gap, asking whether a mandate that no longer fit was a reason to change the structure and bring in outside LPs.
There was not much of a map to follow. Sim can point to a handful of lineages, Nokia’s fund becoming BlueRun and Sapphire Ventures tracing back to SAP among them, but not to anything resembling a documented playbook.
What did move things was bringing outside parties into the discussion before the internal ask. Urs spent real time building and keeping up those relationships, which meant the conversation with corporate leadership arrived carrying proof that this kind of deal exists and that someone wanted in. It also helps that a corporate parent will sometimes accept a discount on assets it no longer considers core.
“Not only does that give them comfort that there’s a template to do it, but it also is nice to have the external validation that says, hey, someone else likes what we’re doing and has a financial interest in purchasing a part of our portfolio.”
Half the portfolio, all of the team
The options on the table ranged from a clean spinout to selling the portfolio outright, and the landing spot split the difference. The fund moved into a new LP-GP structure, a financial partner underwrote a 50% secondary, and Bertelsmann held the other half, letting the company book liquidity and still participate in the upside. The lead ended up taking a little under 50% because Sim and Urs brought their own GP commit plus a group of friends, family, and former founders who had made money with them.
The portfolio was made up of ~100 names, consisting of $100K seed checks written the year before to profitable companies well into nine figures of revenue.
“In our case, it was like everything that was on the books, the entire portfolio… which creates a separate complication around underwriting it.”
A traditional fund secondary usually takes a sliver of one vintage, or all of one vintage. Underwriting a book with that much spread in it is a different exercise.
The thing Sim believes new LPs responded to most was that the team traveled with the assets. The common version has the portfolio changing hands while the venture effort turns out to have been a vestigial thing nobody was dedicated to. He explained the difference using his house as the example.
“This is kind of a rundown house that needs a lot of work. If you said, hey, I want to sell you this house, I walk away, I take your money… In this case, we’re all moving together in the same house. We’ve got to maintain the upkeep and we’ve got to share on the upside.”
The term sheet for a fund with no blind pool
“You’re not raising a committed pool of capital to then go and deploy in unknown investments. You’re basically taking a bunch of things that have already been invested in and moving them into a new structure.”
Plenty of people have formed a venture fund from scratch. Forming one around investments that already exist is much less common, and it brings its own set of challenges. Every portfolio company needed a transfer notice. Some held a right of first refusal and could technically say no. The affiliated-party argument was easy to make with Bertelsmann staying on at 50%, same team, half the ownership instead of all of it, and Sim thinks they had a legal path in some cases even without a company’s blessing. Buyers still wanted signatures on the bigger names, the full “belt and suspenders,” as Sim puts it.
On the business side, the price came down to a discount off the portfolio’s net asset value, with the management company and fund economics worked out around that number. The harder piece was follow-on capital. A 2015 vintage fund has knowable reserve math. This book also held 2023 seed deals, and reserve math gets messy fast when you’re trying to protect your pro rata on a company that might still take off. That tension is what forced the compromises between purchase price and follow-on capital.
Then there’s the practical, less visible half of the work. Under Bertelsmann, banking, reporting, audit, IT, and office space all ran through the parent company’s existing infrastructure.
Leaving Bertelsmann meant rebuilding all of that infrastructure from scratch. Sim and his co-GP suddenly had to handle the less glamorous work themselves: naming the firm, building a website, sorting out insurance and lawyers, and navigating a first-year audit that was still unfinished when we spoke. Sim joked that our other Office of the Venture CFO guests would probably get a kick out of hearing how much of the back office the two of them were figuring out as they went. After all the complexity of carving a venture portfolio out of a corporate parent, independence also meant learning how to run the place.
We also covered the tax event at the center of the whole thing, why 1745 pared back the fintech and consumer buckets it used to cover, how a flexible geography lands with new LPs, and what changed for Sim personally after more than a decade of working inside someone else’s company. Watch it above.
