VC secondaries has long been seen as the smaller and much less widely understood sibling of the private equity secondaries market. In recent years – as LPs, GPs and start-ups themselves have become increasingly pressed for liquidity – venture secondaries have emerged as an important part of the overall VC ecosystem.
“We’ve been proactively talking to a lot of GPs and doing like 101s and 202s because a lot of them just aren’t aware of these structures,” StepStone partner John Avirett told affiliate title Venture Capital Journal, which has focused on VC secondaries in the July/August issue (you can read its cover story on Secondaries Investor here).
Avirett noted that as some GPs look to the secondaries market to generate distributed to paid-in ratios for their LPs, those same LPs are going to their other funds and asking if they are interested in doing similar deals. “I think it’s the beginning of a network effect, and we’ll have to see. Some will choose to do it, some won’t.”
Demand for VC secondaries has both established and new managers raising record amounts of capital. StepStone closed its sixth and largest VC secondaries fund on $3.3 billion last month, well above its $2.6 billion target. Industry Ventures, which helped pioneer the market since its founding in 2000, has seen similar fundraising success. It closed on $1.45 billion for its 10th VC secondaries vehicle last September, 70 percent more than its previous fund.
The growth in the market has also attracted a number of new players to the game, most notably Pinegrove Capital Partners, which has so far raised $1 billion for its strategy. The firm declined to comment on fundraising, however, it has been reported to be targeting $2 billion. Pinegrove has been tight-lipped since its founding in 2023. Its founding partner Gaurav Mathur was kind enough to speak to VCJ recently about why now is a good time to enter the market.
“Similar to private equity secondaries and private credit over the last five to 10 years, we expect a maturation and productisation of liquidity solutions for venture and growth equity. GPs are increasingly thinking about portfolio management to deliver more predictable distributions to achieve their objectives.”
Pinegrove is backed by Brookfield Asset Management and Sequoia Heritage, the wealth management arm of Sequoia Capital, with the pair committing a total of $500 million. It isn’t clear if that commitment is included in the firm’s fundraising target.
While lots of new players are entering the market, Hans Swildens, founder and chief executive of Industry Ventures, isn’t convinced they will all succeed. “There’s not many teams in the world that can do this well,” he said. “For 20 years we’ve had five new firms enter the market every year and not many have succeeded.”
Swildens predicted that “there will be more firms entering, but I think this space is just really difficult to execute in”. It takes a minimum of five to 10 years to become a trusted, repeatable buyer, he said. “It takes a long time for this to develop and have the market adopt you as a liquidity provider that’s trusted.”
Write to the author: ryan.h@pei.group