StepStone Group announced earlier this month that it held a $3.3 billion final close for its sixth venture secondaries fund, the largest ever raised for the asset class.
The fund surpassed its $2.6 billion target and handily beat the previous venture secondaries record—a $1.45 billion fund raised by Industry Ventures last September.
Speaking to Transacted, StepStone partner John Avirett attributed the outcome to a combination of track record and market timing.
“This was our sixth fund, so we like to think we know what we’re doing,” said Avirett, whose team joined StepStone as part of its acquisition of Greenspring Associates in 2021.
StepStone’s fund will provide liquidity to founders and early investors in mature venture-backed companies, purchase interests in venture capital funds from LPs, and assist fund managers with structured solutions such as portfolio strip sales, tender offers, and continuation funds.
“We’ll do a direct secondary if we really like the business, but we can then buy more of that company by buying a fund position where that company makes up a big piece of the NAV,” says Avirett. “We’re ultimately using tools in the toolbox to build exposures into the companies that matter, and if you do that correctly, you can produce returns that look highly differentiated versus traditional secondaries.”
Growing market acceptance may also provide a tailwind for the asset class as a whole.
“The traditional view is that venture capital is a cradle-to-grave industry where the only exit opportunities come from a full acquisition or IPO,” Avirett said. “With exit timelines extending by several years and trillions of dollars locked up in illiquid private companies, that mindset is starting to change.”
Hunter Somerville, a partner at StepStone, provided added color on the calculus taken ahead of secondaries exits.
“As people have taken their medicine and done discretionary markdowns, things have now mostly settled to a point where it’s time to consider it,” Somerville said. “We’ve seen a pretty significant supply pickup over the last two to three quarters.”
Current conditions could continue to support elevated activity through at least the end of the year.
“Interest rates are still an issue, and until the presidential election, a lot of companies aren’t going to do anything drastic,” said Somerville. “The secondaries market is a safe option for a lot of organizations,” added Avirett.