When liquidity dries up: How secondaries are rewriting VC & PE
Are continuation funds, mosaic deals and new retail platforms turning a structural crisis into a market reset ?
Hi all š
Iām told I should be more biting, more polarising. Iām also told Iām too uncompromisingly genuine. Thatās not my nature: I deeply believe in kindness and I donāt like content that criticizes just for the sake of it. But this week, Iām making an exception. Because transparency and intellectual honesty are non-negotiable.
Letās be clear: Venture Capital is struggling today when it comes to exits. IPOs are slowing down, M&A is nearly frozen, LPs are growing impatient - the classic engine isnāt running the way it used to. Nicolas Colin summed it up well when he spoke of the āEnd of private equityās golden ageā.
But this isnāt a terminal crisis, itās a transformation. The market is adapting with secondaries and continuation funds, which have become real infrastructure and tomorrow perhaps with solutions like tokenisation that are rewriting some rules of the game.
Thatās what weāre going to explore in this episode - a conversation with Alexandre Covello that scratches beneath the surface, may unsettle some but sheds light on the future of a sector in full transformation.
The liquidity problem in VC/PE
Private Equity and VC currently face a real structural problem, nothing new here : liquidity is not flowing properly anymore. IPOs remain stalled, M&A activity is scarce and many funds are reaching the end of their cycle without exits to offer their investors.
In this context, GPs are under pressure, LPs are impatient and no longer want to hear only about theoretical valuations. They demand real DPI, meaning actual cash distributions, rather than being satisfied with a paper IRR. This misalignment threatens the very balance of the model, because without distributions, re-ups become more complicated and the ability to retain talent in portfolio companies erodes: equity without liquidity loses a large part of its attractiveness.
Secondaries: from safety valve to infrastructure
You read it everywhere: secondaries are in fashion, whereas they were once perceived as marginal. The first time I started paying attention was when I heard Coller Capital, a UK secondary fund, speak at a conference in 2021.
The global volume of secondary transactions reached USD 152 billion in 2024 (Source: Lazard), growing nearly 40% compared to the previous year. For those less familiar, there are three main types of transactions:
LP-led, which allow investors to sell their fund interests to others,
Direct secondaries, where founders, employees or early investors directly sell their shares,
GP-led, where managers themselves organize a transaction to extend the life of certain assets.
What was once an opportunistic response to a dead end has become an integrated lever in fund management.
Continuation funds: the new ātrendyā tool
The principle of a continuation fund is simple: the GP transfers one or several holdings from a fund reaching the end of its life into a newly created vehicle, financed by secondary investors. Existing LPs can choose either to exit with cash or to continue holding their interest through the new fund. This practice, long seen as an admission of failure, is now rather perceived as a sign of maturity.
There are several advantages: offering liquidity to LPs, allowing the GP to retain its best companies and raising fresh capital without diluting founders.
But this mechanism also carries risks: potential conflicts of interest since the GP is both judge and party, valuations open to disputeā¦
In Europe, the rise is clear with recent examples at Speedinvest, Lakestar or HV Capital (already in 2022), joining a trend long established in American PE.
PE vs VC: two approaches to the secondary market
PE has a head start in this field. Specialised players like Ardian, StepStone, Coller Capital, Lexington Partners, HarbourVest or Blackstone have built multi-billion-USD funds dedicated exclusively to secondaries. These investors have entire teams to structure and execute highly complex, large-scale transactions.
VC, on the other hand, lags behind: venture players until now lacked the culture, tools and experience to systematise such operations. This is precisely what is emerging today: the professionalisation of VC secondaries, inspired by PE but adapted to the logic of start-ups and to the much longer timeline of their exits.
In PE, one practice has become widespread: so-called mosaic or āstrip salesā. Instead of selling a single line or an entire portfolio, the GP or LP sells a mix of assets, a diversified sample blending mature companies and younger holdings. This structure appeals to large secondary players because it allows them to diversify risk and balance the risk/return profile. VC, however, is still far from this sophistication: it remains focused on single-asset continuation funds, built around its ātrophy assets,ā and has not yet systematised the mosaic approach.
New dynamics
The arrival of evergreen funds (covered on Finscale with Olivier Mathiot or Maxime Carmignac) and retail capital is changing the balance. Whereas large secondary funds historically demanded significant discounts compared to reported values, new entrants are often willing to pay more for access to quality assets. This reduces discounts, speeds up execution and creates more competition among buyers. For institutional LPs, this is an opportunity to have more liquidity windows, but also a signal that governance and transparency must be strengthened.
Beyond the large institutional funds, a new generation of platforms is seeking to broaden access to secondaries. I have already covered this several times. Players like Caption or Kriptown offer digitalised OTC solutions that allow individual or semi-professional investors to buy and sell stakes in start-ups or unlisted funds. Their promise is twofold: to bring more transparency and speed to transactions and to democratise access to asset classes that were until now reserved for institutional investors.
These initiatives are still marginal in volume compared to Ardian or Coller, but they reflect a deeper trend: secondaries are no longer only about mega-transactions between LPs, they are also becoming a fragmented market accessible to new types of investors.
Tune in to this episode to explore these trends in detail.
Lift the veil
Last week, I wrote about denial. For years, Iāve been working to lift the veil - at the micro level with individuals (friends, family, clientsā¦) and at the macro level across the industry. What I see, time and again, is how easy it is to hide behind postures and familiar narratives and how much harder it is to take responsibility for what we do and who we are.
Because letās face it: it is uncomfortable to admit when liquidity dries up, when exits stall, when the models we relied on no longer deliver. Just as it is uncomfortable, at a personal level, to admit when we are stuck or when our strategies no longer work. But denial - whether individual or collective - only delays the inevitable.
I believe this: when we face our flaws together (as investors, as entrepreneurs,ā¦) we gain the clarity and the courage to act differently. And it is with that clarity and courage that we can move forward with determination, shift the lines and build the future of our industry.