Episode summary
The $3 Trillion Liquidity Problem in Venture Capital
How I Invest With David Weisburd
· · 36 min · Hosts: David Weisburd · Guests: Jared Carmel
Summary
Jared Carmel says venture capital is now dealing with a liquidity problem rather than a funding problem: roughly $2.7 trillion is locked in venture funds past their 10-year life, while many companies stay private for 20 years or more. He argues that private markets have become the default because companies can keep iterating without public-market pressure, and that the mismatch between long company lifecycles and short fund lives is creating a structural need for secondary liquidity.
He also argues that LPs have shifted their focus from IRR to DPI because “IRR does not pay the bills. DPI does.” In his view, stale distributions are forcing LPs to rethink re-ups and are pushing venture toward more institutionalized secondary trading. He says the secondary market moved from a gray market to real infrastructure as institutional capital took over and as retail SPV activity introduced more risk and less transparency.
Carmel is especially bullish on continuation vehicles, which he says can solve the DPI problem by turning secondary sales into reported liquidity for venture firms. He also emphasizes that the edge in private markets is not just capital, but trust: between GPs and LPs, and between firms and founders. For MVP, he says the business is built around being a “pressure relief valve” on cap tables and expects the firm to keep expanding across primary, direct secondary, and structured liquidity.
Key takeaways
- Jared Carmel says about $2.7 trillion is locked in venture funds past their 10-year life, creating a liquidity crisis for LPs and GPs.
- He argues that venture’s key metric has shifted from IRR to DPI because stale distributions are breaking the old endowment model.
- He says secondary transactions are now overwhelmingly institutional, with roughly 92% institutional and 8% retail.
- Carmel is bullish on continuation vehicles because they can create secondary DPI for venture funds and help solve liquidity.
- He sees trust as a core asset in private markets, saying companies and LPs both reward firms that handle discretion well over time.
Notable quotes
“There's roughly $2.7 trillion of capital that's locked up in venture funds past their 10-year life”
“IRR does not pay the bills. DPI does”
“The secondary market you know broadly has been around for 30 years but the evolution of secondary directs now I don't think's a flash in the pan”
“I think the best and the largest venture funds have the ability to create their continuation vehicles”
“trust is probably the most important thing when it comes to those relationships”
How the episode opens
Jared, you're the founder and managing partners of Manhattan Venture Partners, which has roughly 3 billion in AUM. And last time when we were chatting, you said that there's 3 trillion with a T locked up in venture. What did you mean by that?
There's roughly $2.7 trillion of capital that's locked up in venture funds past their 10-year life. So that means that distributions back to LPs have been relatively negative for the last several years. So meaning the industry is not returning cash which in part is why I have a business and I think the reason simple there's so much private capital chasing these companies that they don't need to go public and staying private gives these companies room to iterate without the noise of a quarterly earnings report.
So they stay private and if you look at some of the most recent IPOs whether that was CLA back in I think it was Q3 they were a 20-year-old company. Think about that for a second. two decades.
SpaceX, which is supposed to go out over the summer, that's a 24 year old business, right? Those aren't outliers. To me, what I'm seeing is that there's a new shape in venture.
And so, the way we see it is that companies are now on this 20-year journey, but funds are positioned for 10 years, which I think is, you know, why we have an active secondaries market.
Perhaps this is a dumb question, but why are these companies staying private for so long? 20 years seems like an egregious amount of time to stay private. — They stay private because they can, right? That's I know that sounds like funny and I I'll I'll explain that. I think the private markets have become the default and the uh public markets have become the exception because a company has enough capital privately that they can iterate on their business, they could pivot on their business and they could build without having to deal with the public market noise that sort of destroys agility.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venture capital liquidity crisis
- venture secondaries institutionalization
- dpi vs irr
- continuation vehicles
- private market spv risks
Companies and tickers mentioned
- COIN
- Manhattan Venture Partners
- SpaceX
- Anthropic
- Databricks
- xAI
- Coinbase
- MVP
- AlphaSense
Watch the episode
Watch “The $3 Trillion Liquidity Problem in Venture Capital” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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How I Invest With David Weisburd, this episode and its artwork belong to David Weisburd. Octagon is not affiliated with the show; this page is an independent summary.
