Venture capital buys shares in a company and holds them, typically for eight to 12 years. At some point, however, the firm must sell its shares. Sometimes, that occurs when a strategic acquirer buys them or when a company goes public and public market investors buy them.
But a venture firm might sell those shares to another VC firm or a fund raised to buy these types of shares. In the last two or three years, billions have been raised to pursue this.
Venture capital secondary activity is nearly equal to the private equity market already, a dynamic that’s only been present since 2023. Should the exit markets continue to suffer a lack of liquidity, VC secondaries will become an increasingly important exit path for illiquid private positions.
As private unicorns continue to exceed 1,000 in count (a growing herd), and the classic liquidity markets remain relatively closed, we should expect venture capital secondaries to grow significantly. Distributed profits from VC firms will be a distinguishing hallmark of VC firms that continue to raise capital in these lean exit markets.
This rise of VC secondaries isn’t merely a tactical shift to navigate a constrained exit environment; it signals a maturity of the asset class. We’re witnessing a segmentation of liquidity options, a diversification of strategies, and the emergence of a dedicated secondary market capable of sustaining returns even amidst primary market headwinds. In other words, the VC firms that adapt to this trend will win.
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