An Investment Without an Exit Is a Donation

“An investment without an exit is a donation,” often attributed to Fred Wilson of Union Square Ventures, encapsulates the current times in venture capital. In the absence of exits, the VC market has leaned on secondary transactions for liquidity, where investors buy and sell shares of startups from existing shareholders rather than directly from the company. As the market evolves, the need for more liquidity and transparent pricing mechanisms has become evident.

It’s Not Fair...

Recently, Sequoia offered its Limited Partners (LPs) a tender offer for Stripe shares, valuing the company at $70 billion. But how did they arrive at that figure? Fair market value assessments can be subjective and are not usually determined by market pricing, potentially leaving LPs with limited options for liquidity. They face a dilemma: how can they exit their positions without straining relationships with their VC investment firms and still maximize their investment’s value, especially when VC-backed companies are staying private longer, making exits and liquidity harder to realize?

84% Decrease in Distributions

According to Wellington Management, distributions from VC funds dropped 84% from 2021 to 2023. This has significant repercussions for LPs - they rely on these distributions to fund their upcoming capital calls for both venture and private equity commitments. Markets are developing to trade pre-IPO shares but they are not sufficient. They work well for small trade sizes but how does an institutional-size LP get liquidity? If a fixed price tender offer (see Stripe above) is the best option today then the market for larger trade sizes is yearning to be developed.  

True Market Price

aShareX’s patent-pending solution uniquely includes all buyers - both fractional and 100% buyers - in its auction marketplace. LPs can market to single investors that can buy the entire investment AND to smaller investors that individually cannot but banded together have far more dry powder than any single investor. Our auction technology does the hard work of organizing the smaller investors and lets the true market price for any size trade rise to the top.  

Send me an email (eric@asharex.com) if you have any questions or for a demo of our auction platform.

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