PE Secondary Market
When a venture capitalist invests in a startup, they commit their money for roughly ten years. But what happens on year three when the fund needs cash? Or when an investor wants out early? For decades, that money was trapped
When a venture capitalist invests in a startup, they commit their money for roughly 10 years. But what happens on year three when the fund needs cash or when an investor wants out early? For decades, that money was trapped. Then the secondary market for private equity grew into an industry worth hundreds of billions. Specialized firms like Lexington Partners and Partners Group realized something elegant. A portfolio company worth $100 million on a venture funds books was actually a real asset. You could value it, buy it, and hold it longer than the original investor wanted to. They started buying LP stakes in funds, buying direct positions in portfolio companies, and buying entire funds from retiring investors.
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