The VC secondary market is on fire. But many LPs are rushing in without fully appreciating the risks. VenCap International plc has been active in VC secondaries (LP positions only) since 1987 — and this is one of the hottest markets we’ve seen. In the first half of 2025 we reviewed $6.5bn of secondary VC deals — a 41% jump from the $4.6bn we saw in the same period last year. This includes both GP-led and LP-led deals. Here are 4 lessons we've learned from nearly 40 years of buying secondaries: 1️⃣ Power law still rules – a few companies will drive most returns. 2️⃣ Quality over discount – our best deal was bought at a premium to NAV. 3️⃣ Know the valuation policy – different VCs can value the same company very differently. 4️⃣ Factor in manager behavior – holding winners vs. selling early can make or break returns. VC secondaries ≠ PE secondaries. The risks are different — but for LPs who can access the right deal, at the right price, the rewards can be exceptional.
Power law definitely rules. Our belief is that smaller funds can outperform as the "winners" can return multiples on that fund. With a big denominator, it's much more challenging to put that money to work in early stage deals and concentrate your holdings.
Great insights, and I like the point about VC secondaries being a different animal from PE. One thing I’ve noticed is that in this market, “quality over discount” isn’t always straightforward. The best assets often need longer hold periods right now, and even with strong MOIC potential, IRR can still take a hit.
Strong points. Do you have any advice on what good “manager behavior” looks like?
thanks for sharing David Clark. What are you seeing in direct secondaries? Similar increase?
Thanks David Clark for amazing analysis. The FED is reducing the interest rates that means alot of liquidity is going to hit the market hence alot of cash available for the LPs and VCs.
the quality over discount point is something recap buyers fail to consider - great comments
Yep, astute points David.
Thanks for sharing, David
Excellent points David
Thanks David Clark Based on your experience, when analyzing secondaries, do you factor in based on GP Profile (Emerging Manager vs. Mature Players)? Or based on region (USA vs. Emerging regions)? Any macro behavior to be aware?