According to TechCrunch, limited partners investing in venture capital are confronting funds that last 15-20 years instead of the traditional 13-year lifespan, with LPs from institutions managing over $100 billion revealing that secondary markets are showing 90% valuation discounts from 2021 peaks. Founders Fund alone raised 1.7 times more than all emerging managers combined in H1 2024, while established managers collectively raised eight times more than emerging managers. The J. Paul Getty Trust now holds funds up to 20 years old still holding “marquee assets,” while Lexington Partners’ Matt Hodan emphasized that secondary markets have become essential infrastructure with companies facing 80% markdowns. Michael Kim of Cendana Capital described the “messy middle” of companies with $10M-$100M ARR that had billion-dollar valuations now being priced at just 4-6x revenue by private equity buyers.
The new normal
Here’s the thing: venture capital timelines have fundamentally changed, and LPs are scrambling to adapt. We’re talking about funds where the majority of capital actually returns in years 16 through 18, not the tidy 10-13 year cycles everyone planned for. That’s forcing institutions to completely rebuild their allocation models and lean more conservative.
And the secondary market? It’s no longer just for distressed assets. A third of Cendana’s distributions last year came from selling at premiums to the last round valuation. The stigma around secondaries has completely evaporated – what used to signal “we made a mistake” is now just part of the toolkit. Basically, everyone’s thinking more like private equity these days, optimizing for cash returns rather than swinging for home runs.
Valuation reality check
The numbers are brutal. We’re seeing companies that were valued at 20x revenue getting offers at 2x revenue in the secondary market. That 90% discount isn’t some outlier – it’s becoming common for what Kim calls the “messy middle.” These are decent businesses growing 10-15% annually with real revenue, but they’re stuck between the 2021 valuation insanity and today’s reality.
And AI has made everything worse. Companies that hunkered down during the downturn now find the market has moved past them. If they don’t adapt quickly, they face “serious headwinds and maybe die.” It’s a harsh environment where even solid companies can get left behind.
Emerging manager crunch
The fundraising environment for new managers is absolutely brutal. Founders Fund raising 1.7x what ALL emerging managers raised combined? That tells you everything about where institutional money is flowing. LPs who went wild during the pandemic are now concentrating their dollars with established platforms.
So what’s a new manager to do? Kim suggests networking with family offices, who are “typically more cutting edge” in betting on new managers. He also recommends pushing hard on co-investment opportunities, even offering fee-free, no-carry deals to get interest. But let’s be real – unless you’re “super pedigreed” like an OpenAI co-founder, good luck convincing a major endowment to back your $50 million fund.
Changing rules
The panel largely agreed with Roelof Botha’s controversial take that venture isn’t really an asset class. The dispersion of returns is so wide that the best managers significantly outperform everyone else. That makes planning around venture capital incredibly challenging for institutions.
And proprietary networks? They’re dead. “If you’re a legible founder, even Sequoia is going to be tracking you.” What matters now is hustle – managers who actually embed themselves in founder communities, like Casey Caruso living in hacker houses and competing in hackathons. Contrast that with “some 57-year-old fund manager living in Woodside” who’s completely disconnected from today’s founder ecosystem.
The game has changed, and LPs are demanding a new playbook. Funds lasting 20 years, 90% valuation discounts, and winner-take-all fundraising aren’t temporary blips – this is the new reality of venture capital.
