A naukri.com initiative
Medium
2w
157
Image Credit: Medium
The Future of VC Liquidity: How Funds Can Finally Free Themselves
- VC fundraising has dropped sharply in 2024 due to low exit volume, reaching its lowest level since 2015.
- In 2024, only $76.1 billion was raised through 508 funds, making it one of the slowest years for new fund formation.
- Facing performance challenges and drying liquidity, GPs are exploring alternative strategies for value realization.
- Secondary transactions are being rebranded as strategic and necessary, accounting for 14% of global secondary volume in 2024.
- The shift towards secondaries offers a more flexible and controlled path to liquidity, providing options beyond waiting for a public exit.
- In 2024, the secondary market transaction volume reached a record-high of $162 billion.
- Venture capital firms like NewView Capital, StepStone, and Hamilton Lane are leading the trend towards secondary market transactions.
- New mechanisms such as continuation vehicles and structured secondaries are allowing GPs to actively manage portfolios and restore capital rotation.
- Secondary deals offer a way to generate DPI before the end of fund life, crucial for maintaining team morale and LP confidence in an industry where long-term holds can be challenging.
- In 2024, venture secondaries traded at a discount to NAV, offering liquidity opportunities despite the discount.
- The structured deals in the secondary market have become cleaner and more aligned, with bid-ask spreads narrowing to 2018 and 2019 levels.
- Secondaries are not just for aging unicorns; they are being used at the growth stage, allowing founders to sell parts of their stakes early on.
- The use of secondaries benefits various stakeholders, providing cash back to LPs, more control to GPs, and motivation to founders and employees.
- Experts predict the secondary market to grow another 15–20% in 2025, highlighting its increasing importance in the VC landscape.
- Secondaries address issues like messy cap tables, value unlocking, partial exits, better pricing, and smoother paths to IPO in a challenging exit environment.
- GPs, LPs, and founders need to rethink their fundraising strategies in light of the changing VC liquidity landscape.
Read Full Article
9 Likes
For uninterrupted reading, download the app