Our funds are 20 years old’: Limited Partners Confront VCs’ Liquidity Crisis
In a candid discussion at TechCrunch’s Disrupt 2025 event, limited partners overseeing more than $100 billion in assets laid bare the venture capital industry’s simmering liquidity woes. Funds once expected to wrap up in a decade now linger for 20 years, trapping capital and testing investor patience. Moderated by TechCrunch’s Marina Temkin, the panel of endowment chiefs and fund-of-fund managers called for urgent adaptations in valuations, exits, and fundraising to restore balance.
Venture Funds Defy the Clock: Lifespans Stretch to Two Decades
The venture capital model was built on quick turns—invest early, exit fast, repeat. But today’s reality looks nothing like that blueprint. Panelists revealed that many funds from the early 2000s are still active, holding onto high-value assets without clear paths to monetization.
Adam Grosher, director at the J. Paul Getty Trust, which manages $9.5 billion, shared a stark example: “In our own portfolio, we have funds that are 15, 18, even 20 years old that still hold marquee assets, blue-chip assets that we would be happy to hold.” This isn’t an anomaly; it’s becoming the norm as market conditions prolong holding periods.
Lara Banks, managing director at Makena Capital—a firm with $6 billion in private equity and venture commitments—explained how her team has overhauled its forecasting. They now assume an 18-year fund life, with the bulk of capital returning only in years 16 through 18. “Conventional wisdom may have suggested 13-year-old funds,” Grosher added, underscoring the shift from optimism to pragmatism.
This extension stems partly from a post-2021 slowdown in IPOs and acquisitions. According to PitchBook data cited in the discussion, global VC exits dropped 38% year-over-year in the first half of 2025, leaving $2.5 trillion in dry powder worldwide but little movement on realizations. LPs like the Getty Trust are responding by tightening allocations—capping venture exposure at 5-7% of portfolios to avoid overcommitment in illiquid bets.
The ripple effects are felt beyond balance sheets. Pension funds and endowments, major LP players, face regulatory pressures to demonstrate returns within fiscal cycles, amplifying the urgency for VCs to deliver.
The Yawning Valuation Gap: 90% Discounts in the Secondary Market
At the heart of the liquidity crisis lies a brutal disconnect between what VCs carry on their books and what the market will pay. Portfolio companies buoyed by 2021’s frothy valuations are now fetching fractions of their marked worth, eroding trust between general partners (GPs) and their backers.
TechCrunch’s Temkin highlighted a real-world case: a SaaS firm valued at 20 times revenue internally was shopped in secondaries at just 2 times— a 90% haircut. Michael Kim, founder of Cendana Capital, which oversees nearly $3 billion in early-stage funds, dubbed this the “messy middle.” These are companies growing at a modest 10-15% annually, with $10-100 million in recurring revenue, once prized at unicorn status but now markdowned by 80% or more.
Public markets tell a similar tale. Comparable software firms trade at 4-6 times revenue, per Matt Hodan of Lexington Partners, a secondaries giant with $80 billion under management. AI’s uneven rollout has widened the chasm: “These companies are now in this really tricky position where if they don’t adapt, they’re going to face some very serious headwinds and maybe die,” Hodan warned.
Data from Cambridge Associates backs this up. Their Q3 2025 report shows VC net IRRs dipping to 12.5% for vintages post-2018, down from 18% peaks, as unrealized gains evaporate under scrutiny. LPs are demanding more transparency—quarterly valuations tied to secondary bids rather than optimistic projections—to bridge the gap.
- Key Valuation Stats: 80% average markdowns for “messy middle” firms; secondary offers at 2-6x revenue vs. 20x internal marks; $2.5T in global VC dry powder, per PitchBook (H1 2025).
- LP Demands: Shift to market-based pricing; AI adaptation mandates in LP agreements.
Emerging Managers Squeezed: Fundraising Tilts to the Titans
For first-time and diverse fund managers, the liquidity crunch doubles as a fundraising famine. Established behemoths are hoovering up commitments, leaving newcomers to scrape for scraps in a risk-averse climate.
Kelli Fontaine, also from Cendana Capital, dropped a sobering stat: In the first half of 2025, Peter Thiel’s Founders Fund alone raised 1.7 times more than all emerging managers combined. Mega-funds like Sequoia and General Catalyst scooped eight times the total. “LPs are overexposed from the 2021 boom,” Grosher noted, explaining why institutions are doubling down on proven platforms.
Banks at Makena echoed this, revealing her firm backed just two new managers in 2025—down from four annually—while funneling the lion’s share to incumbents. Yet, there’s a silver lining: The shakeout has weeded out “tourist” VCs, like a former Google exec who launched a $30 million fund on name recognition alone, only to fold amid the downturn.
Kim views venture’s dispersion as a feature, not a bug: “Unlike public equities, where managers cluster within one standard deviation of a target return, things are widely dispersed in venture.” Top performers can deliver 5-10x multiples, justifying the hunt for alpha in emerging talent. Still, endowments like Getty demand pedigree—think co-founding hits like OpenAI—for entry.
Featured Image: A split-image graphic showing a cracked hourglass with dollar bills spilling out on one side (representing stalled liquidity) and a diverse group of suited professionals debating at a conference table on the other, evoking tension and dialogue in the VC world. Alt text: “Limited partners and VCs debate liquidity crisis at Disrupt 2025 panel.”
Secondaries Emerge as the Go-To Exit Valve
With traditional IPOs scarce—down 45% from 2021 peaks, per Dealroom—secondaries have shed their stigma and stepped into the spotlight. These private share sales between investors offer a rare liquidity tap without full company sales.
Fontaine reported that a third of Cendana’s 2024 distributions came from secondaries, often at premiums to the prior round, not discounts. “If something is worth three times your fund, think about what it needs to do to become six times,” she advised GPs eyeing early exits.
Hodan at Lexington agreed, noting secondaries now feel routine, not remedial. A June 2025 TechCrunch piece by Charles Hudson, analyzing top decacorns, found selling at Series B could net 3x+ returns—beating later-stage holds in winners like Uber or Airbnb.
This shift is reshaping LP strategies. Makena now allocates 10-15% of commitments to secondary vehicles, up from 5% pre-2022, blending them with primaries for hybrid liquidity. But challenges persist: Thin trading volumes mean not every asset finds a buyer, and tax implications can bite for LPs in certain jurisdictions.
Venture’s Evolving Role: Not Your Standard Asset Class
Is venture even an asset class anymore? Panelists nodded to Sequoia’s Roelof Botha’s recent thesis: Its wild return variance— from wipeouts to 100x moonshots—defies diversification norms.
Kim, who’s preached this for 15 years, stressed reliability in platforms for baseline returns and emerging programs for outsized gains. Grosher grappled with planning around such unpredictability, favoring “pedigreed” funds. Banks sees evolution, too: Stripe’s crypto rails position it as a Visa hedge, elevating venture beyond a 2-5% portfolio sliver.
Hot sectors like AI and U.S. biotech buoy optimism, with Boston, New York, and Israel as standouts. Banks even forecasted a consumer tech rebound, starved by B2B dominance.
Internal Image: A bar chart illustrating VC fund lifespans, with bars rising from 10 years (pre-2010 average) to 18-20 years (2025 norm), overlaid on a timeline of exit volumes declining since 2021. Alt text: “Chart: Evolution of VC fund durations amid liquidity slowdown.”
Navigating the New Normal: Tips for VCs from the Front Lines
For GPs staring down the barrel, the panel offered battle-tested counsel. Network with family offices—they’re hungrier for unproven bets, per Kim—and dangle fee-free co-invests as bait.
Fontaine debunked the “proprietary deal flow” myth: “Nobody has a proprietary network anymore… If you’re a legible founder, even Sequoia is going to be tracking you.” Hustle matters: Cendana scores managers on founder access, pick savvy, and grit, spotlighting cases like Topology Ventures’ Casey Caruso, who embeds in hacker houses for edges.
Grosher urged perpetual commitments sparingly, given overexposure risks. Overall, adaptation is key—embrace secondaries early, align valuations with reality, and lean into AI’s winners.
- Fundraising Hacks: Target family offices; offer co-invest perks; build “hustle” cred via immersive networking.
- Exit Updates: Series B sales yielding 3x+; 1/3 of 2024 LP distributions from secondaries at premiums.
The liquidity crisis, as unpacked by these LPs, signals a maturing VC ecosystem—one demanding realism over hype. With funds pushing 20 years and valuations recalibrating, the path forward hinges on collaboration. As Kim put it, the dispersion rewards the bold: Emerging managers who adapt could thrive, while laggards risk obsolescence. Stakeholders must prioritize transparent exits and innovative structures to unlock trapped value and sustain innovation’s fuel.