VenCap’s Investment Director Matt Russell sat down with Zero One Hundred Conferences to unpack how a four-decade venture fund-of-funds is leaning into secondaries—and why this corner of the market may be poised for a breakout in 2025.
A pure-play venture investor built for the power law
Founded in 1987, VenCap has invested ~$3B across ~500 venture funds, exclusively in VC. Russell says the firm’s philosophy starts with a basic truth: venture is a power-law asset class where a tiny fraction of companies—“the top 1%”—drive most of the returns. VenCap’s primary strategy is to back managers who repeatedly access those outliers with meaningful ownership; its secondary strategy is a natural extension, adding more exposure to those same winners at compelling entry points and with faster cash-flow profiles.
What “VC secondaries” actually are
“Secondaries” in venture come in three flavors: (1) LP stakes in VC funds, (2) GP-led continuation vehicles, and (3) direct company stakes. VenCap focuses on the first two, while many managers pursue selective direct secondaries in high-conviction companies. That mirrors sponsor-to-sponsor activity in private equity, but in VC the market is earlier and thinner—creating room for specialists who know the underlying portfolios.
Why secondaries, and why now
Russell highlights three advantages versus primaries:
You know what you’re buying. Secondary portfolios are fully (or mostly) invested and skewed to the winners already emerging in a fund.
Entry price can be attractive relative to fair market value (not just optical NAV discounts).
Duration is shorter, since the assets are later-stage and closer to liquidity.
The market is still nascent—by design
Venture funds globally hold ~$3T of unrealized value. In 2024, about $16B of VC fund and GP-led secondary deals closed—roughly 10% of the overall secondary market, or ~0.5% annual adoption relative to VC’s unrealized base. By comparison, private equity (~$4T unrealized) accounted for over 70% of all secondaries last year and is approaching ~3% adoption—a sign of how early VC still is. As traditional exits slowed, LPs and GPs have turned to secondaries as a portfolio tool, with GP-leds accelerating after blue-chip firms validated the structure—momentum VenCap is seeing most from the U.S., with notable opportunities now appearing in Europe.
Pricing nuance: FMV vs. NAV—and why quality wins
Headline discounts can mislead. Many venture funds carry companies at last-round values, which are lagging; valuation policies vary widely across managers. A conservatively marked fund may yield better look-through entry pricing at a smaller stated discount than a less conservative peer with a larger discount. For VenCap, the realized outcome comes from quality of company exposure first, price second: “We’re not interested in buying mediocre assets for big optical discounts.”
2025 outlook: Deal flow is up; capital is the bottleneck
VenCap’s own pipeline underscores the trend: Q1 deal volume rose ~40% year-on-year, and historically about a quarter of opportunities show a clear “VenCap angle” worthy of deep work. The limiting factor isn’t opportunity—it’s dry powder. With adoption climbing and GP-led usage spreading, Russell expects 2025 to bring a full slate of high-conviction secondary deals for investors prepared to underwrite at the company level and move quickly.
The takeaway
If venture rewards access to the top 1%, secondaries may be the most targeted, time-efficient way to scale that exposure—without waiting a decade for portfolio construction to play out. For LPs seeking venture’s upside with better line-of-sight on assets and timelines, Russell’s message is clear: the opportunity is here; the question is whether capital is ready to meet it.
