The rigid 10-year fund model is outdated for companies staying private longer. The future is permanent capital vehicles with hedge fund-like structures, offering long durations and built-in redemption features for LPs who need liquidity.
The explosion in the number of solo GPs and small VC funds is not primarily fueled by institutions, but by a growing pool of individual and high-net-worth capital. This new LP base will demand fund structures with better liquidity and less administrative burden.
The venture growth market will see significant innovation in credit products. VC firms themselves will increasingly offer debt, not just equity, creating hybrid vehicles that can use yield from a debt sleeve to fund LP redemptions and offer more stable returns.
The secondary market began after 2000 by buying failed corporate VC portfolios for 10-40 cents on the dollar. Today, it has completely flipped; sellers are healthy, and transactions are typically done at a gain, not a loss, making it a core liquidity path.
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.
Top companies like Stripe or SpaceX can stay private forever by using robust secondary markets to provide liquidity to employees and investors. This allows them to focus on long-term growth without the burdens of public company reporting and quarterly profit pressures.
Expect more acquisitions of VC firms by large asset managers. The strategic driver isn't just AUM, but the ability to apply cutting-edge AI and tech from the VC portfolio to accelerate growth and EBITDA in their traditional private equity-owned industrial and consumer companies.
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.
Borrowed from private equity, continuation funds allow a GP to move a prized asset from an old fund into a new vehicle they still control. This provides liquidity to LPs in the original fund who can choose to cash out, while others can roll over and continue to ride the winner.