TLDR:
- Venture capital funds are turning to secondary exits due to declining startup valuations and lack of liquidity.
- Over the past few years, private secondaries have facilitated around $7.7 billion in exits, competing with IPOs and block trades.
The article discusses how dwindling valuations in the startup ecosystem and a lack of liquidity are driving venture capital funds to explore secondary exits. Traditional exit options are becoming scarce, leading to an uptick in secondary market activity. The trend has been highlighted by industry experts Ashish Fafadia, Pankaj Naik, and Anand Lunia in a discussion with CNBC-TV18’s Nisha Poddar.
Naik mentioned that companies are preparing for IPOs and block trades, while private secondaries have facilitated billions in exits, particularly in the tech sector. A rise in portfolio secondaries, where secondary-only funds buy out GP portfolios, has been observed globally and is growing rapidly in India’s tech sector.
HNIs are actively participating in acquiring venture capital portfolios, with both institutional and individual secondary markets active alongside IPO and traditional secondary exits. Fafadia outlined prevalent models in secondary buyouts, emphasizing the necessity for exits resulting in discounts as venture capitalists and private equity investors need liquidity as fund lifespans conclude.
