Investing in Venture Secondaries - [Business Breakdowns, EP.193]

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Nov 27, 2024

Ravi Viswanathan, founder and managing partner of NewView Capital, dives into the intriguing world of venture secondaries. He unpacks the bespoke nature of these deals, explaining how various players like VC sellers and founders navigate the market. Ravi highlights the growing need for liquidity amidst delayed IPOs and discusses the evolving landscape shaping future transactions. His insights on relationship-building with management teams and the importance of a long-term strategy offer valuable perspectives for anyone interested in private market investments.

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INSIGHT

Secondary Transaction Basics

Venture-backed startups have extensive cap tables, and secondary transactions begin with an intention to sell from someone within that cap table.
This desire to sell has increased due to institutions' need for DPI and individuals' need for liquidity.

INSIGHT

Early Secondary Market Experience

Ravi Viswanathan's experience with venture secondaries began during the dot-com crash when he witnessed the resulting liquidity desert.
The secondary market then was smaller but provided valuable lessons.

INSIGHT

Drivers of Secondary Market Shift

Extended IPO timelines are a key driver of the secondary market's growth, alongside the power law dynamic of venture capital and portfolio bloat.
This has created a significant need for liquidity, especially in downturns.

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Today, we are covering the increasingly thematic market of venture secondaries. My guest is Ravi Viswanathan, founder and managing partner of NewView Capital.

We cover some of the basics around these transactions because so much of private markets are bespoke. And while Ravi confirmed that the bespoke nature makes each individual secondary deal unique, there are consistencies in terms of how they approach the opportunity.

We discuss the various players in the market and their motivations for buying and selling, whether they are VC sellers, founders, employee sellers, or VC buyers. Ravi lays out the structural dynamics that are likely to make this a larger market well into the future. Please enjoy this Breakdown of venture secondaries.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.

Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com).

Show Notes

(00:00:00) Introduction to Secondary Transactions in Private Markets

(00:08:43) Understanding the Basics of Secondary Transactions

(00:10:28) Evolution and Growth of Venture Secondaries

(00:13:12) Impact of Market Dynamics on Secondary Transactions

(00:15:20) Pricing and Valuation in Secondary Markets

(00:18:47) Challenges and Strategies in Secondary Transactions

(00:28:25) Market Trends and Future Outlook

(00:33:30) Venture Sponsor to Sponsor Transactions

(00:34:05) Buyer Mentality and Exit Strategies

(00:35:39) IPO Market and Valuation Trends

(00:38:09) Focus on Growth and Profitability

(00:40:04) Strategic Exits and Market Dynamics

(00:49:48) Risk Dynamics and Market Competition

(00:55:44) Key Lessons and Future of Venture Capital