Episode summary
The New VC Exit Strategy
How I Invest With David Weisburd
· · Hosts: David Weisburd
Summary
The discussion centers on how venture capital is increasingly using secondaries as an intentional exit path, not a distress signal. David Weisburd argues that early investors should trim positions when a company has scaled far beyond the entry valuation, because harvesting gains creates the liquidity buffer LPs need and helps return capital more efficiently. He also says his firm is focused on late-stage pre-IPO secondaries, where bid-ask spreads are wide and discounts can reach 50% on assets priced during 2018 to 2021.
Weisburd frames the late-stage secondary market as opaque but highly attractive when investors can underwrite directly from existing positions, sometimes with board-level information, and price the entire capitalization waterfall. He says the best opportunities are companies within two years of IPO, profitable, and still growing 20% to 30%, with enough margin of safety to justify the trade.
He is bearish on the broader venture landscape: many managers, he says, are shifting from alpha generation to asset gathering, while LPs are defaulting to familiar brands and often ending up with beta. Weisburd argues that fund size increasingly hurts performance, citing the view that venture funds above $400 million face diminishing returns and that size is the enemy of performance in this asset class.
Key takeaways
- Weisburd says secondary sales can be a disciplined way for early-stage VCs to harvest gains once a company has grown far beyond entry valuation.
- He says late-stage pre-IPO secondaries can trade at discounts as high as 50% on assets originally priced between 2018 and 2021.
- Weisburd argues the best pre-IPO targets are companies within two years of going public, profitable, and still growing 20% to 30%.
- He says many VC managers are becoming asset gatherers, and LPs often mistake familiar brands for true alpha.
- Weisburd cites the view that venture funds above $400 million face diminishing returns, making size a performance headwind.
Notable quotes
“you have uh more early stage VCs using secondaries as their exit, right”
“the company needs to be within two years of going public for us to get excited and do our underwriting. Needs to be profitable. Uh needs to be growing though still at 20 to 30%”
How the episode opens
You have uh more early stage VCs using secondaries as their exit, right? And that shouldn't be something that um is problematic. That should be something that's thoughtful from a risk management perspective and harvesting gains and creating that risk buffer that you want to see within portfolio management.
So, if you're a preede seed investor, which we certainly are, uh, out of our venture fund, and you're investing in an average valuation of 20 million to 50 million, um, if a company reaches 2 to 5 billion, you should be taking money off the table, right? That's just thoughtful risk management. And obviously, that creates that flywheel circle that we're looking to get in terms of returning capital uh, to LPs.
Uh and so I think the second aspect to that is that um we have a fund that exclusively focuses on latestage preo secondaries where we're seeing uh a significant amount of bid ass spread meaning we're seeing discounts there at meaningful levels particularly right now because those assets were priced between 2018 to 2021 and you're seeing a willingness to take a discount in some cases as high as 50%. Um, and those are typically preceded investors who are either using the secondary as the exit as described or they're in their extension periods. And the death nail for a VC is you actually distribute private stock to your LPs.
That is an absolute no no. And so we need solution providers like ourselves that can provide liquidity to those GPS who have done their job right. They sourced the right company that was generational.
They rode that wave for 10 plus years. Now it's time to take liquidity off the table either in whole or in part. And then the second group that we end up uh supporting from a liquidity perspective is former employees, right?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- vc exit strategy
- liquidity breakdowns
- secondaries market
- fund size underperformance
- ai hype vs fundamentals
Watch the episode
Watch “The New VC Exit Strategy” 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.
