As the venture capital has ripe, over the past 12 years grow 5 times 350 billion dollarsThe scale of private funds has never been greater. Since The weekend markets are quiet And both with regulatory and market forces bring uncertainty, there is an increase in exit pressure. The VC business relies primarily on M&A and IPO for profit. However, given the economic instability, the LCD firms will need to access the secondary market to flourish in this next economic era.
Venture Capital buys stocks in the company and keeps them usually for eight to 12 years. However, at some point, the firm must sell its actions. Sometimes this happens when a strategic buyer buys them or when the company goes to the public and public investor market, buys them.
But the venture firm can sell these shares to another VC firm or fund collected for buying such stocks. In the last two or three years billions have been collected for this.
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VC parallel with private capital
This evolution on the Venture capital market is parallel to the history of private capital, and the LCD can take advantage of getting out of the book PE – or risks to reduce the asset class. In the 1970s in the 1970s in the 1970s, private justice was, during the initial years of redemption. It remained such a ten years until Michael Milken Bonanza’s unhealthy connection was catapulted to consider more ransoms. Chronically in Barbarians at the gateRed RJR Nabisco ($ 64 billion in $ 2025) noted the end of the Jumbo Recovery Age.
The PE industry has also grown by segments with low market firms, medium market and bulging. Lower firms on the medium market buy, keep and improve the company for several years, and then sell it a wider company and so on. This picture brought consistent profitability and liquidity. There are about eight secondary fundsThe biggest of which costs more than $ 22 billion: own asset class.
The main difference between venture capital and private capital, which can disrupt the future VC potential for profitability through the secondary, is that total loss often occurs in VC portfolios. It is my improved Since 2001, when the capital loss ratio was about 50%. Now the ratio of LCD losses is about 20% – but in the case of private capital, this is a rare occurrence. How does the buyer appreciate the company or the portfolio that may go to zero? Not to mention that most private companies that produce cash, and almost all startups that are supported by the LCD give losses. Further complication of evaluation, no wonder vc seconaries tradeOn average, from 40% to 60% discount on the cost of a pure asset (Nav) in 2024.
Significant secondary also affect the main portfolio companies. Ever since the Law on Creation of Jobs in 2004, the startups had to evaluate their usual shares to the price options. This is a figure known as The assessment of 409a To do this, it requires it. Significant secondary insiders can change this price, which may have a positive or negative impact on the strike price at which employees received options. Prices for a strike increase mean less up for new employees.
Matters of asset class
The secondary activity of venture capital is almost equal to the private capital market, the dynamics, which has been present only since 2023. If the exit markets continue to suffer from the lack of liquidity, VC sentaries will become increasingly important to enter into illiterate private positions.
Because private unicorns continue to exceed 1000 per count (growing herd), and the classic liquidity markets remain relatively closed, we must expect that venture capital will grow significantly. Distributed profits from VC firms will be a distinctive feature of VC firms that continue to attract capital in these skinny weekends.
This secondary VC growth is not just a tactical shift for a limited exit environment; It signals the maturity of the asset class. We observe segmentation of liquidity options, diversification of strategies and the emergence of a special secondary market capable of maintaining profits even among combat winds in the primary market. In other words, VC firms adapting to this trend will win.
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Originally this story was presented on Fortune.com
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2025-04-29 14:59:00
Tomasz Tunguz
