The exit corridor
Each portfolio company has a realistic exit range and timeline. Map them at year 3 of the fund:
- Strategic acquirers — list 5 by name. What metric makes each one buy? At what valuation?
- PE / growth funds — for cash-flow positive companies. EBITDA multiples, not revenue multiples.
- IPO — increasingly rare for venture exits. Need ~$200M ARR with 30%+ growth in 2026 markets.
- Secondary sale — to growth funds, secondaries platforms, or new entrants in your cap table.
Secondary sales — the underrated tool
Selling part of your position before the company exits. Increasingly common at Series B+ when valuations are high but liquidity is low. Three approaches:
Tender offer
Company-organised event where existing shareholders sell a fixed % to a new investor. Clean. Tax-efficient (long-term capital gains in many jurisdictions). Founder-supported. If you can sell 25–40% of your position via tender at year 5, you've de-risked the fund significantly without losing upside.
Direct secondary
You sell to a specific buyer — often a growth fund coming into the cap table. More negotiation; less standardised pricing. Use when company isn't running a tender.
Secondary platform
Platforms like Forge, Hiive, or Setter match private-company sellers with buyers. Faster but typically at a 15–25% discount to the last priced round.
GP-led continuation funds
One of the fastest-growing parts of the secondary market. The mechanics:
- Your fund (Fund I) is at year 8. You have 4 winners that aren't ready to exit.
- You raise a new vehicle (Continuation Fund) with new LPs to buy those 4 positions out of Fund I.
- Fund I LPs choose: take cash now, or roll into the new vehicle.
- You continue to manage the assets with a new fee/carry structure.
Done well, this gives Fund I LPs liquidity, gives the winners more time to compound, and gives you continued upside. Done badly, it's a conflict-of-interest minefield.
What to consider 2 years before any exit
- Tax structuring. Long-term vs short-term capital gains, qualified small business stock (QSBS in US), 80-IAC in India. Talk to tax counsel before the offer arrives.
- Cap-table cleanup. If the company has 200 angels and 9 SAFEs, an acquirer's diligence will take months. Help simplify.
- Founder retention. Most acquirers ask for 2–3 year founder lockups. If your founders are burned out, the deal gets harder.
- LP communication. When liquidity arrives, LPs want clarity quickly: how much, when, what the tax impact is. Plan the comms doc 6 months ahead.
The unsexy truth about exits
The exit you actually get is rarely the one you imagined at investment. The discipline is to:
- Take liquidity when it's offered, in size that meaningfully de-risks the fund.
- Don't fall in love with a position. The math is the math.
- Protect founder optionality — don't push for an exit just because your fund clock is running.
- Communicate honestly with LPs. The IRR you don't realise is fictional.