The old VC mindset of "let your winners run" and waiting for an IPO is gone. Today's GPs must act as fiduciaries by creating liquidity plans, proactively orchestrating secondary sales, and navigating complex buyout deals with partial rollovers to generate returns for LPs.

The traditional venture model focused on buying and holding. In today's market, where companies stay private longer, a VC's fiduciary duty to LPs has evolved. It now includes proactively selling portions of high-valued private holdings in the secondary market to generate distributions (DPI), even if it creates friction with founders.

General Partners (GPs) have shifted from viewing secondary sales as an LP-driven nuisance to a strategic tool. They now facilitate liquidity for investors to maintain their reputation and use continuation vehicles to retain top-performing assets beyond a fund's original lifespan.

The traditional VC model of waiting for an IPO or acquisition is obsolete. With companies staying private for 20+ years, firms must develop the skill of actively selling positions in secondary transactions to provide necessary liquidity for their LPs.

Just as buyout funds began selling portfolio companies to other buyout funds post-2000, VCs now increasingly exit via secondary sales to other VC or PE firms. This has become a dominant liquidity path over traditional IPOs or strategic M&A.

To remove emotion from portfolio management, Amplify has a policy to begin considering secondary sales once a position hits a 10x return. They then trim the position in tranches over subsequent funding rounds, allowing them to lock in gains and de-risk the fund without exiting a winner entirely.

While investing (buying) gets the attention, the actual job of a VC is disciplined selling to return capital to LPs. This requires constantly re-underwriting positions to determine if they can still meet the fund's target returns from their current valuation, rather than holding on indefinitely.

In frothy markets with multi-billion dollar valuations, a key learned behavior from 2021 is for VCs to sell 10-20% of their stake during a large funding round. This provides early liquidity and distributions (DPI) to LPs, who are grateful for the cash back, and de-risks the fund's position.

Investors fixate on selecting the right companies, but the real money is made or lost in the decision of when to sell or hold a winning position. The timing of an exit can create a 100x difference in outcomes. Having a disciplined approach to portfolio management and liquidity is more critical to fund performance than the initial investment choice.