Proposed Investment in General Catalyst Group VI, L.P.

Memorandum to: State Investment Council
From: Timothy Walsh, Director
Subject: Proposed Investment in General Catalyst Group VI, L.P.

The New Jersey Division of Investment (“Division”) is proposing an investment of $25 million in General Catalyst Group VI, L.P. This memorandum is presented to the State Investment Council (the “Council”) pursuant to N.J.A.C. 17:16-69.9.

Investment Rationale: As part of NJDOI’s mandate to find top quality venture capital firms to commit to on a direct basis, staff and SIS have selected General Catalyst as a firm that fits those goals. We see General Catalyst as a firm that is positioned to capture ‘best in class’ opportunities over the next cycle and an attractive investment for NJ. General Catalyst has established itself as a formidable, entrepreneur-friendly VC with wide breadth and depth of expertise. The Firm has proven its ability to create significant, proprietary investment opportunities by “hatching” startups internally, and gaining significant ownership in portfolio companies at attractive valuations.

To date, long-term investors committing their pro-rata share to all prior GC funds have generated Top-Quartile returns (as measured by the aggregate Total Value relative to their Paid-in-Capital); and the potential for further upside in prior funds remains, especially as a number, approximately four, portfolio companies are currently in registration for IPO.

General Catalyst’s recent geographic expansion to Silicon Valley and the New York metro area have substantial promise to increase the Firm’s access to unique early-stage opportunities; and provided GC’s cohesive team and collaborative culture, to substantially enhance the possibility of making successful breakthrough, industry-shifting investments.

A report of the Investment Policy Committee (“IPC”) summarizing the details of the proposed investment is attached.

Division Staff and its private equity consultant, Strategic Investment Solutions, undertook extensive due diligence on the proposed investment in accordance with the Division’s Alternative Investment Due Diligence Procedures.

The fund utilized Shannon Advisors (the “placement agent”) as third-party solicitor in connection with the potential investment. Staff has determined that the placement agent and its representatives met the registration, licensing and experience requirements set forth in the Division’s Placement Agent Policy (the “Policy”). Pursuant to the Policy, the fund has disclosed the contract between the fund and the placement agent, specifying the scope of services to be performed by the placement agent and the fee arrangement between the placement agent, the general partner and any other third party.

We will work with representatives of the Division of Law and outside counsel to review and negotiate specific terms of the legal documents to govern each investment. In addition, each proposed investment must comply with the Council’s regulation governing political contributions (N.J.A.C. 17:16-4).

Please note that the investment is authorized pursuant to Articles 69 and 90 of the Council’s regulations. General Catalyst Group VI, L.P. will be considered a venture capital investment, as defined under N.J.A.C. 17:16-90.1.

Formal written due diligence reports for the proposed investments were sent to each member of the IPC and a meeting of the Committee was held on November 22, 2011. In addition to the formal written due diligence reports, all other information obtained by the Division on the investment was made available to the IPC.

We look forward to discussing the proposed investments at the Council’s December 8, 2011 meeting.

Source: State of New Jersey State Investment Council