Picking Winners Late in the Race: Why Venture Secondaries Are a Decade-Long Opportunity

At the end of the day, a venture capitalist is selling optimism, hope, whatever you want to call it. These venture secondary firms are really selling liquidity for those investors that have gotten tired of optimism. And I think that that's really going to keep us in business as many of the messy middle start to become tired and actually need to really drive towards liquidity. We're here at the Venture Secondaries Summit. Mike Justin, it's great to be sitting down with you. If you could just take a moment and introduce yourselves in your organization, so our listeners have some context on who you are and that will help us set the context for the balance of our conversation today. Sure. You've got a Mike Boggs here, managing partner of Revelation Partners. And really what our firm is, is a firm that's created and defined a category of providing liquidity to private healthcare investors. In the old world, if you are a private healthcare investor, you really had two options for liquidity or two doors that you could go through. Could IPO your company or you could sell it in an M&A event. And what we've done at Revelation is we've really created a third door. We built a third option for these private healthcare investors to allow them to get interim liquidity if they want. And you can't do that privately in healthcare, which is a regulated, reimbursed, and clinically oriented environment without having a team of specialists. And fundamentally that's what Revelation is and really what this audience is, which is a team of specialists who are obviously focused privately in healthcare. And that's what we built at Revelation here over the last 10 plus years is a world class team of healthcare experts that help us underwrite source and negotiate these transactions and provide interim liquidity to these private healthcare investors. Well said Mike. Justin Burton, managing director with industry ventures, which is now part of the external investment group, part of Goldman Sachs as of January 26th. The firm's been around 25 years and the founding partners of the secondary strategy, including myself and two others. We all came from the venture side. And one of the realizations of the dot com correction and crisis in 2002, 2003, which is when we really started our first funds was that venture capital is very hard. And that having exits having winning companies is a long road and that the top firms, the top 5% of all venture firms were really were the ones producing the returns. We knew that investors really wanted exposure to great companies. And we thought about doing a venture fund and it was almost impossible to raise capital in 2003. So we came up with the strategy really going after and playing on the idea that the big private equity secondary funds were doing, which was a way to give our investors exposure to great companies, great venture back private businesses, but through secondaries and by through secondaries, it's really mitigating typical venture risk. And so from the very beginning, our whole thesis was we want to give our our investors exposure to these great companies, but we want to give them exposure after they're already successful. And so we talked about a lot about a horse race that we really just want to choose the winning horse when there's 20 yards to go in the race. And so what that means is that these companies are already at scale, there are already proven products or proven services, they already have good venture syndicates and so they're hopefully fully financed or close to fully financed. And that the risk we're really taking on and what we want to give our investors to take on is exit valuation risk and exit timing risk. And so we want to mitigate all the other venture risk. And so that really resonated with a certain class of LPs that said, hey, we're fine if you just get a 2x return, we're not trying to get that 3 to 10 x. We want to get this stable 2x. And then we really pushed and implemented the idea of having principal protection. And you didn't hear that in venture. We wanted to say every deal that we do, we want to get a 1x return, we want to see our capital back. And so a 1x in a low case, a 2x in a base case exposure to these really exciting venture back businesses. So we've built industry ventures of the last 25 years, we've raised 8 institutional funds were investing out of our fun 10 today, which is a billion and a half vehicle doing the exact same strategy we've been doing for almost 25 years now. So I think that's a really great framing as we sit here today venture secondaries have become or hopefully are becoming a bit of a liquidity engine, but it wasn't always that way. So maybe before we dive in just talk very briefly about kind of this event who's in the room and why this is important for the industry and what it means as kind of venture secondaries have evolved. Yeah, I think if you go back in time a little bit to what Justin was just talking about when secondary started it was really a tool for distress sellers and it's evolved into an institutional tool for creating structural liquidity for the private markets. And as that evolution has happened, you've taken what was you know a niche category made it more institutionalized and along the way you've had specialists of all whether it's the industry venture formally industry venture folks, whether it's the revelation folks many of the folks in the room were all specialists in our own way in revelation partners we focused in specifically in health care where there's different dynamics going on in some of these other industries. And along the way we felt that the voice and the needs of the specialist wasn't being heard there were a lot of conversations happening about how secondary fits within private equity and bio, but not how it fits within growth and venture. And so Justin and I got together a few years ago and said let's get everybody all these specialists in the room to talk about the issues and what's happening specifically in our market which is a very opaque market. It's a market where we transact with counterparties by appointment it's by appointment shopping whether it's with corporates in my case founders whether it's institutional investment firms it's really relationship driven. It's appointment shopping to try and get into these names that each of our respective firms is trying to get into in the private markets and that's really what the venture secondary summit is about. And then to to Justin's point it's almost an oxymoron where venture you think of as high return you know big spread you could have a big return and you could have a big loss. Where secondary is supposed to be steady atty now it's Tony Guin in his younger years it's a rise out of the giants now it's batting for average its consistency and so the combination of the venture secondary summit in itself is almost a bit of an oxymoron. As to native sandie against I appreciate the podres analogy if you also thanks for that I guess as we think about kind of the maturation of the market you know a lot of the distributions have come via secondaries if you know not to be provocative but if the IPO market comes back if eminate comes back and what happens to the secondary space. There's so much value that's trapped today privately across the ecosystem you know in health care alone it's over 800 billion dollars. Over 50% of that value it has been held for more than five years. A big IPO year for health care is 50 IPOs there's not enough IPOs that can happen to release the liquidity valve for what's trapped privately in health care it's part of the reason that we think at revelation sort of the aha the revelation that we had is by using a secondary strategy to approach the private health care market that that's actually a better way to invest privately in health care or most liquidity actually happens through eminate now that said there's clearly in the tech world in just in probably closer to it than me you know there's a few big names here whether it's SpaceX or anthropic that could go public and unlock liquidity but there's still big structural problem privately in the broader venture market that isn't going to be released just by a couple of these names. And so I don't know if you have specific thoughts. Yeah I think your question is a bridge we can cross in a decade that there's really five to 10 years of NAV that's going to need to get out even if IPOs and MNA come back at a regular cadence. And so as you referenced last year in 25 the majority type of exits out of ventures was secondaries so over half of all exits it was just amazing when you put that perspective of what secondaries were doing 20 years ago so everyone who is an investor in the world today all different types from families to sovereigns to hedge funds to pensions to venture funds file funds everyone is participating in venture. And all these groups are going to need liquidity and there's no way that even if IPOs 5x the amount next year over the next five years there's still going to be this need for secondary so I think it makes us all feel great that we have at least 10 years ahead of us. Yeah I think if you then just tie that to the interest by the investor community in secondaries it sort of. of buoys that same point, which is there was over $90 billion raised by secondary firms in 2025. There's been a continued prolific growth of secondary firms, even just at this event that we have here again, which is very focused on specialists. We have 40 investment firms here today, last year, the inaugural year of this event. We had 30 investment firms when Justin started. There was essentially two. There was three or four when I started. There's been a continued prolific growth, both from a capital support basis and from an investment firm basis, all driven by this big overhang of liquidity that's going to be required to be unlocked. A few IPOs, I don't think really is going to fix that problem. The more challenging question to me is all of this interest has created a commoditization in a reduced spread of value that these secondary firms can bring to bear. If you're not a specialist, you're going extinct. You need to have some specialty angle to drive alpha in your returns, whether it's in our case being healthcare experts, whether if you're broadening the asset class to credit or real estate, whether if it's in the tech space having specific access plays, all of that's going to be really important as we look to the future. Justin, I might ask you just to pick up on that because Mike made an interesting point about this idea versus of specialists versus generalists. I think your firm is more of a generalist than a specialist, although you're a specialist in LP, you know, secondary. Maybe talk to that. In a way, it's taking a step back and saying what are the benefits of being a specialist? The benefits, of course, are sourcing venture secondaries and pricing them. And sourcing really, we think, can only be done if you're a specialist. What does that mean to be a specialist? It means that you've been in the sector for decades. It means that you've built relationships with all the various players in the market. Industry ventures were a limited partner over 800 venture firms by buying LP stakes. GPs who run these venture firms are the ones who are on the boards of these companies, who know how the companies are operating, that know the conversation is about when they're going to exit and how much the board will sell. So being a specialist and being one degree separated is extremely important. Being a specialist by also on the direct side of talking to the management teams, knowing the metrics of these companies, knowing the comparables and the competitors is just so vital. And so I think it's taken us years to get to a point where we have confidence over what are our ceiling prices we can pay for any portfolio of LP interest, what are our ceiling price we can pay for any direct. I think if we were a generalist doing private equity, secondary, real estate, secondary, it would be very difficult. So I think that raises an interesting question as this industry matures is secondaries in asset class or is it a strategy? How do you think about where this fits in investors portfolio? I think it's evolved as you go from, again, a niche category to what has become a more institutionalized category. You've seen all this money flow in. That's created kind of commoditization at the top end. And it's also you've seen a desire by these big multi-strategy large asset managers to get into the category. So that's created a bit of a frenzy in terms of acquisition. So most recently, EQT buying collar industry obviously was acquired by Goldman. We've had LGT go and acquire a firm. There's a few other firms for sale right now. It was just announced that Lazard acquired collar or sorry, Campbell Lutons again on the broker side, but all under this theme of trying to get access to what I would call as an asset class that can drive no fee paying AUM for these big asset managers. And so how you exist as an independent employee-owned firm, boutique firm in that ecosystem, I think is a real question. Revelation, G-squared, Spencer McCloud in the audience, a few others in the audience as well exist as these independent boutique firms. And I don't think you can do that without really being a specialist because if you're not having a very differentiated offering in this marketplace today, you're going to then get be eaten up by these large multi-billion dollar firms that don't have to earn the same type of return and can outgun you in terms of price. And so I think that's all really important. And then when we think about how we're operating here at Revelation, you know, similar to to Justin's approach of saying, let's get into these really good companies, you know, we all create our shopping lists. You know, I want to, I want to own my orange juice at $10 a gallon. I want to go buy my, my dozen eggs at two bucks a dozen. And then the secret for us is then going and trying to find and price shop those things, those companies, those companies we want to get into at prices we want to pay, whether it's at Myers, whether it's at Safeway, whether it's at right aid, you know, we're going and finding motivated counter parties that have a reason to transact. And then the key difference for us is that these counter parties, they're not available to the public. These stores are not available to the public. It's by appointment shopping. And you can't do that, at least in my category without having a team of experts in healthcare. And then that's true in other categories as well, where it's a relationship access component. And I think that's really what the specialist, you know, between myself and Justin and some of the folks in this room, that's what they're really offering to investors. And, you know, at the end of the day, we have two or three hats that any GP in a secondary fund is going to wear in what you're talking about, of course, is investing being a specialist knowing how to price, knowing how to figure out the exit. But of course, we can't be in business unless we can still raise capital. And so when our pitch book or presentation goes in front of an LP, I really think being a specialist is going to separate us from a generalist's secondary fund, because we can really tell them what we're going to give them exposure to ultimately. And I think, you know, we really learned over the years about how to present ourselves in front of a pension plan or a family office, not only what value we're adding, but because we're a specialist that we're going to out price our competitors or outright. It might be obvious, but maybe just on that point, kind of what have you found works best when you're talking to investors who might have the perception that, you know, as a secondary as investor, you're kind of like a discount, you know, just like a deep discount buyer who may not appreciate the specialization that you bring to the table. Yeah. And we've evolved over 25 years. And as you point out, I think our original pitch in 2003 and four and five was, Hey, if you adventure, we'll buy it. And sometimes it'll be 90% off, sometimes 50% off. We quickly realized that all the exits were just being driven by one or two companies, the top companies. And we really didn't want to own an index of venture. And so what's happened really, and I think of all of our thesis here is that it's been a flight to quality. And that we're seeing, especially over the last five years, that only the top companies are going to be able to exit in this tight liquidity time frame. So focusing our whole business around how can we build positions in the best companies in each sector is what our investors want. Actually, on that same point that just made it get to where we are today, it's been really hard. I'm sure Justin went through the same thing, but we had to beg Barlin's deal, you know, the first bits of money for the first five years, trying to prove the strategy. And part of that's an outcrop of outcrop of how the secondary market started, which is it was a tool for distressed sellers, which largely meant that a lot of the firms approaching it were discount buyers. And get a great deal on this asset. That perception then caused a lot of folks in the room that held these companies to have a negative view as to what a secondary was. You know, if you go back in time to what venture capitalists approach was, it's the three Musketeers bar. It's one for all for one. If you're going out the door early, that's a problem. That's a negative connotation around the company or the firm. And so evolving along the way to, hey, this isn't just a discount trade. To we either want to be in these great names or we want to take a more fundamental view, combined with the institutionalization of the category. I think that's all been part of the evolution of the process. And it really goes to advancing your thinking as a firm along the way to how you go and underwrite these companies. I think that's all been part of the growth story here, both in this category and at this event. Mike, you've mentioned a few times that, you know, it's by appointment only shopping. I mean, how do you build a conviction and think about underwriting the companies that you want to be a part of? I think there's two. components to it. The first is, you know, having your shopping list. Now in my world, world, which is, which is healthcare, the power law approached to investing the top 1% of companies, you know, driving most of the returns doesn't necessarily apply. It's a highly distributed set of private companies. A billion dollars is a big outcome in our world. There are no anthropics and space x's. So it's a very different approach than the tech world where everybody's got their own version of it, but some components are in access play. What we've done is, you know, you spend the time to cultivate the list. That's typically no different than a traditional healthcare sophisticated group. The real secret sauce is then spending all the time with the counterparties, understanding and really being a strategic partner to your potential counterparties. In our case, that's a multi-channel approach. It could be a corporate group where there's a, you know, some corporate investor, a big publicly traded corporate investor as building an investment portfolio. It could be a departed employee, former founder of a company, but it could also be an institutional venture firm, or private equity firm that's that's really going through fund lifecycle management. And so it's really spending the energy there. And that to me is in combining it with expertise. That's really the secret sauce. Justin, I'm curious. I mean, because, you know, Mike and Revelation are so focused on healthcare. You're both specialists, but that's a very unique area. How does that, how does what Mike shared contrast with how you see the world at industry ventures as, you know, looking across a broader continuum of opportunities? Yeah. We're still taking venture risk at the end of the day. We've also learned a lot of lessons that we don't want to have that 5% exposure right off the bat. We don't want to do a 50 or $70 million transaction on day one. We really want to build up to that position over time because companies will miss budgets, will miss quarters. We would rather do a smaller transaction, follow the company for a couple quarters, get to know the management team, get to know competitors. Maybe we can do a transaction that's cheaper and lower our cost basis. Maybe it's dilutive, but we'd rather pay up over time to to minimize the risk of that company. So I think one is that diversification and easing into it. The second is our strategy is we do a third secondary directs, which all the eggs in one basket a little riskier. We do a third limited partnership interest secondaries. Those are diversified by their nature. And then we're doing a third continuation vehicles, which are a little bit of a hybrid. So we've built up this portfolio optimization over the years just to minimize that risk, knowing venture risk. How are you navigating the other big sons and galaxies in your universe? Whether it's the Andresons of the world or the light speeds, which I'm sure would say, yeah, we could continue to build a position in this same super exciting company. How have you approached navigating that? In our case, it's a little different where there's not as much capital focused on these companies and it's highly distributed. It's always interesting to me to hear how you guys have navigated getting additional access to some of these companies. Yeah. And there's been like five significant events over the last 25 years or changes. And one of them is what you're pointing out, which is about a decade ago venture firms when we were buying common shares and their best businesses, the GPs would say, that's great. We never buy common shares. We only want to be in senior preferred. We're only going to be in the latest round. And then of course, what they realized is why not the venture firms? Why shouldn't they double their ownership in these companies? And so all of a sudden, from being a partner with us, they all became competitors. But what we realized is if you're a founder of a company, you're going to be suspicious if your board member is going to buy your shares. You were always going to think, hey, they load ball me, or they didn't give me a great price. So what we started to do about 10 years ago is to partner with the board members, with their founder selling or insider selling. And we could be the arms length third party to price the transaction and then split it with them. And so we've done that successively in a lot of cases. Of course, sometimes they say, hey, we're not going to let any outsiders come in. We just want to buy the shares. But more often that we, both of us, can serve this role as a third party, someone who could support the company if they raise around. But importantly, the sellers are going to feel like they got a market price. How how well understood do you think that concept that you just explained is across either people in the room or just broadly across the venture landscape? I think there's a lot of room to go. And that's basically our pitch, because a lot of times the founders or sellers won't realize we're out there. There's an option. And so I think it's really taking decades to build relationships with these GPs, and Dresden, whoever it may be, to let them know that we're this third party that's there to help. Not only get exposure, but to really price these assets. Yeah, if you go back to some of the themes that we've heard today, you've heard the theme of growth that this asset class, the specialist category, continues to grow rapidly. You've heard the theme that there's been continued acceptance, but still the explanation to LPs or potential investors as to why would this person be willing to sell at a discount in this great name or that this interesting price or to Justin's point, why is this founder going to sell to a non insider? All of that explanation is still happening today with investors. It's better than it was 10 years ago. In my case, I've been this has been my career. I've been doing this for 20 plus years, and it's come a long way, but it's still got a lot of room to grow, which I'm sure Justin experiences daily as well. And so I think those are some of the two major themes that we've heard here today. And then the third is in just in terms of some stats. We had some LPs and allocators talk earlier. And their their main point was secondaries, not even the specialist category, still really only five to 10% of institutional allocators budgets, more or less. And so that's still a relatively small and we're a subset of that. That's still a relatively small percentage. Now it's going in the right direction, but that's that's I think as we kind of look into the future, especially with all this excitement around some of these really, really high profile names. I think it will continue to trickle into all the other aspects of this category. The one thing you didn't ask, you mentioned 20 minutes ago, 10 minutes ago, about what happens if there's all these IPOs for liquidity? I would almost take the other side, which is what about all these secondary firms? What happens if how do they go get liquid? What happens if they don't produce liquidity? There's been all this money that's flowed into them. Has there been evidence of of you guys producing liquidity for your investors? In our case, we primarily relied on M&A and that's been a pretty regular consistent drumbeat, but it'd be interesting to kind of get your take on that to just and if if you have thoughts on the liquidity side. Yeah, it's it's the question and that's really I think twofold is one why we've had a flight to quality. So we want the top 25 positions in our funds to drive at least 50% of the proceeds and because we know those top 25 are going to exit and the question is when and how much and that's the risk we want to take. But for your point, it's what about the other 50% of the nav? What about this as I relax to say the messy middle of these venture funds with these B plus assets? They're not A, they're not C, but they're they're generating cash. They're growing nicely 10 to 30% they can't go public. So what's going to happen with all these? And so our thesis is one private equity more and more is buying venture back businesses one out of four M&A exits. A venture is going to private equity and that's going to increase as we've seen. And then secondly, more and more we're acting like a venture GP using the secondary markets for liquidity. So we've sold off two of our older secondary funds in the market. We've used some of the groups here to help us sell them. And I think going forward more and more, we're going to use the secondary markets to sell our tails. So as you think about one of the trends across private markets and you mentioned the messy middle, you know, you've got the rise of the mega managers, the generalists, you've got the specialist to I don't want to put words in your mouth, but stay specialized. And I think smaller by design. So you could be nimble. And then you have a lot of firms that are in that messy middle. I mean, you just mentioned a few kind of scenarios of how things may play out. But how do you think about this dynamic, this barbell effect that's happening? And it's not just unique to venture. It's happening in private equity. It's happening in real estate. It's happening across all of private markets where the middle is really kind of under a lot of pressure to innovate or perform while the big continue to get bigger. And there's some room at the bottom for those those boutique type firms. I think it just creates more opportunity specific to our category. It will continue to create more opportunity for buying because it's not so obvious what the exit in the liquidity option will be for these groups. So I think it's just more opportunity as you kind of look forward. And then at the end of the day, you know, a venture capitalist is selling optimism. Hopefully, hope, right? Optimism, hope, whatever you want to call it. Yeah. So panelists earlier said, I mean, the hope of course is in the messy middle, you're going to get some of these green shoots. You're going to have these breakout businesses. We are classifying them as the middle just because they're they haven't hit that inflection point yet. So there is a ton of potential for these mid to late stage businesses to break out and start doubling their growth and adding new products. But the question of course is if they don't, how are we going to get rid of them, which is I think your point. And I think I would imagine you revelation as well as we're going to start pricing that out in the market. Seeing if there's other buyers, other secondary funds or maybe even some primary investors pension plans who want that exposure and would buy it from us. There was a lot of talk earlier today about SpaceX. And I actually think all roads lead back to that because it largely mirrors Facebook, which I know you guys were involved with early too as many of the firms were where there's a lot of secondary private market activity and a handful of really big names and they've all planned to go public. It will lead to a hangover in broader secondary market volume, but that will eventually settle and it will drive back towards an increasing number of transactions as you kind of look out in the outer years. As those companies eventually get public, it will eventually lead to unlocking a big amount of liquidity for a and it'll percolate to all the LPs, all the various investment firms, both public and private. That money will eventually get recycled back into the private markets as people start to see actual realized returns for these really big outperformers. And so I think on a longer term horizon, these really few big outperformers will drive liquidity that then kind of gets recycled back into the market. And so eventually it'll kind of work itself out that way. Justin, I just want to go back to the point that you made earlier around how you partner with the larger firms in the space. And I think there's been some conversation this morning about kind of anthropic and some of the challenges related to the bigger firms, making it harder to buy into the best funds in the secondary trade and the best assets. How do you think about, you mentioned one way to navigate that, but how do you think about that as like a structural impediment to your ability to continue to grow in scale at industry ventures? Yeah, I think you're bringing up two of the biggest challenges, I think facing all of us in this room, going forward from a secondary perspective, which is our companies can allow firms like ourselves, outsiders to transfer in to their company. Are they going to sign the transfer agreement once we have a transaction with a seller? We're seeing that some companies only want insiders to buy shares, especially if they're the top five businesses in the world. And so I think it's up to us in our group to really pitch what a benefit having a group like ourselves in the cap table is. And we can talk about how we can do small purchases over time with employees, $100,000 transactions, and we can buy up shares and spend time on it and that their big growth funds aren't going to. So I think the transfer issue is going to be present going forward. The second thing is very similar because we buy LP interests is that more and more GPs only want buyers to buy LP interests from sellers if they're going to support them in subsequent funds. And so we're seeing that there's this big movement to direct selling LP's to primary investors to pension plans, which are buying. And so I think that's one of the challenges we're going to face. And that's one of the reasons our group and a lot of the big secondary funds are doing primaries on the side or have some allocation within our secondary fund to support GPs because really at the end of the day, we want to be a partner not only just a buyer, but also someone who can support not only the companies, but the funds going forward with primary capital. I think it's a really important point that just made, which is back to the theme of access, whether it's land and expand, you know, you develop an initial position in a company, which we do as well with the goal of then expanding it later, that you have to do that earlier in order to have the right to be able to go buy it later. Really being a capital partner of either the company or the GP, and that's really your value add where the traditional venture capitalists, you know, their value add is helping that company grow and build its operating team. You're now serving as a strategic capital partner, whether it's to the GP, you know, being a strategic LP to them with the idea that you'll either buy, support their next fund, you know, support co-invest or also opportunistically provide capital to in liquidity to the underlying operating companies. The combination of those two things, I think is a very important strategic tools kit that you have to have to bear in this future period of operating in secondaries. And I think each of our firms is playing those in different ways and employing them because it's really important as the category continues to evolve to be able to deploy those tools because access and information is so important. Yeah, and even further on that, by having revelation in a cap table, your pitch and having an instrument ventures in a cap table is, hey, management team, if you ever want to do a tender, we can talk to you about that. We've done it before, we can give you some thoughts, we can tell you maybe do you want to hire a broker, do you want to do a thrust. Same thing as being an LP and being a strategic LP in these funds is, hey, you're 12 year old fund, there's all kinds of solutions. You can go talk to a broker, but we're going to give you really what we think because we're a vested partner, we're an LP. So we can talk to you about, hey, should you sell these assets directly? Should you go to a continuation vehicle with this asset or not? Or hey, do you want to go proxy your LP base with companies staying private longer? These issues are really prevalent. And so that really is going to be part of our pitch going forward. It's an outcryp of where we've been into where we're going, which it goes back to at the beginning. A lot of this is opportunistic trade. One off deal, I buy it from you, you sell to me, we part ways, and that's really evolved to know these are going to be multi, you're going to do multiple transactions with the same counter party, you have to view it as a partnership and relationship driven, it's always been relationship driven, but we have more than one interaction with this counter party. And so that longer term view is just becoming increasingly important and is going to be critical to the future of being successful in this ecosystem. One of the things I came up earlier, we were talking about the LP secondary market and kind of its evolution over the last 20 years as more and more players have filled in and there's a long, long tail of new entrants. As you look at the maturation of venture secondaries in particular, are there, can the LP, what's happened in LP secondary service like a cautionary tale for how you're thinking about kind of the future evolution of venture secondaries? I think that the were probably a long ways away from where the LP market is, which has become very high velocity, pretty liquid. If you want to get liquidity, if you're CalPERS and you want to get liquidity for your multi manager portfolio, there's probably a price for it. There's a lot of buyers, there's been a lot of money raised and you've seen the compression and spreads. Maybe 15 years from now, that's an issue. I just think we're still wild west, like we are a long ways away from being there. At least that would be my view. Yeah. I mean 15 years ago, to your point, we would go sit down in front of a pension plan and they wouldn't know how to bucketize us. Are you a venture fund? Because we have venture allocation, or are you a secondary fund? But secondary funds to them were focused on private equity. And so I think at least today, we're getting recognition or something different and maybe we should use the Cambridge venture index to judge us maybe a little bit of the second areas, maybe a little of hybrid. But we're still very unique. And I think that's a great thing. It really just comes down to that we're giving these LPs this risk mitigated venture exposure. And as long as we can generate liquidity, DPI, just like everyone else needs, I think we're an asset class that's very sustainable. So let's move into looking into the future. One of my favorite topics and I'm sure you all can see perfectly with perfect resolution into what will happen next. But maybe to help set the stage, if you want to frame up where you think we are today, and you just talked a little bit about this Justin related to the relative maturity, what do you think the next five to ten years in this space look like? So I think in the shorter term, it's up into the right. I mean, you're going to continue to see capital flow in for two reasons. One, a bit on the text side, but there's pure fomo of wanting to get into these just top names, the data bricks, the space X, the anthropics, the Anders of the world where it's a real access play. You can't, the layman on the street wants access to these and they can't get in without some sort of specialist or semi specialist gatekeeper allowing them to get in. And that in the shorter term will drive a lot of interest there. I think in the medium term, you have this structural liquidity problem, 800 billion of unrealized value just in healthcare. It's trillions of dollars in the tech world. And so until that gets resolved, you're going to need a liquidity provider to solve issues for institutional LPs. Most institutional LPs today in the US have 30, 29, 32% allocations to the private markets. That was set a long time ago when they lowered rates so that they had to out earn a specific benchmark. They could only do that by over allocating to privates. And now we've gone through a whole cycle of unwinding that. They've raised interest rates. They can go out now, earn that same required return somewhere else in the bond market or fixed income market. And conversely, a lot of these long duration private market funds have underperformed. And so they're in this big unwind cycle where they're kind of lowering their allocation to private markets and waiting for liquidity. And so we're a natural solution to that, a bit of a derivative solution. And so until that's resolved, which is at least, I think Justin quoted some of the numbers in health care. It's probably a nine year overhang, $40 billion typically generated in any one year. Until that's resolved, I think you're just going to continue to see, you know, kind of up under the right growth in this category. Yeah. To further there, I think it's really hard to look beyond a decade. And so I think we can squarely say what the next 10 years look like. And for us, it'll a little bit of pitch to our model is we can break it out into our three different deal types. So secondary directs, we know companies are staying private longer. There's an incentive for these companies to get to year 10 to year 15 when they have substantial scale. So companies staying private longer means shareholders need to monetize partially on the way and get liquid. So that is going to continue to be a driver for our secondary direct market. Likewise, a third of what we do is buying limited partnership interests. We know that more and more LPs are not reupping at their rate they used to across the board because they don't have the distributions to recycle into capital calls. And so that lack of DPI is simply put going to be the big driver of LPs selling. And then the other third of what we're doing is these tail and fun restructuring these continuation vehicles, which is likewise GPs manufacturing liquidity through generating these sales processes, these CVs to provide distributions to their LPs. And that feels like it's going to have another decade. So it's it comes back to this structural point, which is company staying private longer, lack of exits, all stakeholders in the venture business needing this liquidity. Last week I was in a room in Nashville filled with real estate people and there was no conversation about up into the right and there was no optimism. So it's very refreshing to hear your perspective just to kind of ground us though what can go wrong, right? I mean, you mentioned, you know, Justin, you alluded to a few things earlier, but like what's going to stop what could get in the way of stopping this kind of up into the right trajectory that you're both anticipating will happen over the next decade. I mean, I think we're all beholden to generating liquidity in secondaries, even more so. The reason people allocate to us, the reason we believe this is a better way to invest privately in healthcare is because you can you can generate attractive total return. You can do it in a less risky fashion and you can get cash back faster to LPs. If you don't deliver on those three things, or cash back faster to LPs is it is a really important component of it, then you're going to have a broken model. If it happens on a one off firm basis, that's okay. If it happens on a structural basis across these, you know, specialist firms and that's going to be an issue. Now, the way I think our firms have typically navigated it is, you know, Justin used the horse race analogy earlier, you know, betting on the horse halfway through the race. In our case, we think of it going back to the Tony Gwynne discussion, you know, we're showing up in the seventh inning when the score, the giants are up for zero. But somebody, you know, the is in the front row seats, they got to go home and relieve the nanny. And so you know statistically, the game should be over by the top of the ninth. Now, could go to extra innings. Maybe that's one. Maybe that's two extra innings, songs that's not the world series last year. But you know statistically, the giant should win. Now, you could be wrong, but you're most of time not going to be wrong. And I think that's what makes our model interesting. And that's what avoids the most likely problem. The thing that breaks it is liquidity. And if you can underwrite the high predictability of outcome, or at least mitigate that, I think that that's going to help you kind of navigate that risk. But to me, that's the biggest one that messes it up. I think the biggest thing, positive thing that both our groups and secondary funds can do is the realization that you can never time the top. And that if we have a good secondary transaction, like the seller we bought from, we should monetize on the way up. And not worry about if we're leaving money on the table. And I think we've learned that lesson a lot. And it's one of the hardest lessons out there. But sometimes do you think you need to keep learning it? Yeah. A lot. Hopefully. But we sold something six months ago. And now it's 50% higher. But we only sold 20% and we still feel good. We created liquidity. There's a chance that if this company goes public, we might have sold at the high water mark. But I think the challenge that we have for our team is we should start selling assets. If they've hit our thesis and just move on and don't worry if there's another turn on the multiple. And if we can do that successfully, our whole industry, I think we can really be sustainable. Perhaps is the last question. But as you think about kind of the consensus and we've heard a lot of what I would say are generally consensus opinions, at least in this room. Is there something that you think the consensus has wrong about venture secondaries right now? And we didn't practice any of these questions in advance. So. Probably. I think I don't know that it's consensus. But I think that if you went around and asked everybody in this room, what they think about this, you may get the most diverse set of answers. Which is how are you thinking about competition and how do you how are you out competing all these entrants that are coming into the market. I think everybody in this room, you know, is going to go around and say, oh, I've got this differentiated investment model. Right. I do something different. That's how you're going to go around and say you raise money. But I think the reality is they're just continues to be a lot more groups trying to do this same or deploy this similar version of the strategy. How you deal with that competition and how you articulate your value proposition and deliver on it, I think is probably the area where there's the least amount of consensus because I think everyone's trying to understand what's it mean. White speeds now are registered investment advisor. Are they going to get into this business on the private equity side. What's it mean that new mountains now going to go off and launch a secondary business. What's it mean that, you know, Goldman just, you know, bought industry. Are there now going to be a number of other firms like GA. Are they going to try and get into the secondary business? How do we now navigate that as it's very difficult to raise money as a traditional primary venture capital firm today if you're not raising money for AI. And a logical way to then go raise money that's easier is deploying a secondary strategy for all the attributes we know that are good. So to me, that's the one area where there's probably the least amount of consensus. And there's certainly been negative connotations of secondary funds. And I think we've been able to successfully mitigate them over the years. And I think our challenges to anticipate the new ones that are coming, but, you know, historically as we talked about, hey, secondary funds are low ballers. They're going to pay bottom price. They don't care about the quality, the quality assets. And I think we've all been able to mitigate that saying, hey, actually we're providing. a benefit and we just want to pay a full price for a great asset. And then secondly, what I mentioned earlier, which is, hey, secondary funds aren't going to add any value to my cap table, find a management team or find a GP. They're not going to add any value to me going forward. But I think we've been able to mitigate that by saying, hey, we're strategic shareholder. We can help you with buying some of your ex employees out. We can help you think about tenders. Likewise on the GP side, hey, we can really help you think about your older venture funds or maybe your smaller LPs. And then I think going forward, we're going to have these new challenges. And I think we just really need to anticipate them. One of them is, hey, how are you all going to provide liquidity to your investors? And I think using the secondary markets smartly is probably one of the biggest hurdles for us going forward. Well, I think that's about as good of a place to wrap up as any. And what I will reflect on is I think it's interesting and it kind of ties back to the podcast. And this isn't just a shameless plug. But I think private markets and most people will agree are at one of the most structurally significant inflection points over the last 30 years. And one of the observations that I had when I started the podcast was the opportunities sit down with leaders across private markets and help them tell their story, their story about how they're differentiated is really important. I think there's a lot of lessons we can learn. Listeners will learn a lot from this conversation. I think folks in this room can learn a lot how private equity, how venture, how real the last sets, how credit and infrastructure revolved. And I hope if you take a moment to listen to some of the other episodes, you'll find that as well. But thank you so much for being a great audience here. Thank you so much for joining me and having me spend a real pleasure. Thanks, Brandon. Thanks, Poppren. Thanks for listening to the latest episode of the distribution by Juniper Square. If you liked today's podcast, please share it with a colleague or a friend. And don't forget to subscribe and rate the distribution on Apple podcasts, Spotify, or wherever you listen to podcasts. You can connect with me on LinkedIn by going to www.linkedin.com/in/becedloff or you can find me on Twitter @becedloff. You can also find a video recording of this conversation on demand at junipersquare.com/the-distribution. Until next time. [Music]