LONDON, July 18, 2024 — Ben Funk, partner at Launchbay Capital, a leading multistage venture firm, today highlighted the rapid growth and potential of private market secondaries as a key investment strategy for both institutional and individual investors, looking for risk-mitigated options.
“Private market secondaries have evolved from a niche market to a mainstream investment strategy,” said Funk. “We’re seeing unprecedented growth in this sector, with the market reaching $132 billion in 2023, up from $42 billion in 2015. This represents a compound annual growth rate of over 15%, making it one of the fastest-growing segments in alternative investments.”
Recognizing the potential of the secondary market, several firms have launched or are in the process of raising significant secondary funds, including Blackstone, StepStone Group, and HarbourVest. These funds are complemented by more focused players like Launchbay Capital, 137 Ventures, and Manhattan Venture Partners, which specialize in shorter duration funds and more liquid secondary investments.
Funk also noted the growing interest from global family offices and institutional investors. “We’re seeing increased participation from pension funds and family offices, which is boosting liquidity in the secondary market. This trend is particularly notable in emerging markets like Mexico, where the venture secondaries market is projected to exceed $1 billion in transaction volume over the next 2-3 years.”
This growth is driven by several factors:
- Higher Returns: Secondary funds often offer high Internal Rate of Return (IRR), potentially exceeding the performance of most public markets.
- Shorter Holding Periods: Unlike traditional private equity funds with 10+ year lifecycles, secondary funds typically offer 4-5 year investment periods, allowing faster realization of returns.
- Attractive Valuations: The tech market adjustment of 2022-2023 has led to more realistic private company valuations, creating opportunities for secondary buyers.
- Diversification: Secondaries allow investors to build diversified portfolios of late-stage private companies, spreading risk across multiple investments.
- Increased Transparency: New platform technologies like Forge Global, Hiive, and Launchbay provide real-time data on private company valuations, enabling more transparent and informed decision-making. The valuation and performance of these investments, as well as deals legal support, that are carried out independently with firms such as Kroll, GreenbergTrauig and regional specialists such as 414 Capital.
Funk cited successful case studies, including Airbnb and SpaceX, where secondary investments yielded significant returns. In Airbnb’s case, investors in a 2016 secondary round saw a substantial well documented multiple as a return on their investment in just four years, when the company went public in 2020.
“At Launchbay Capital, we’re leveraging our expertise and technology to capitalize on these opportunities,” Funk stated. “Our team has developed robust due diligence processes and industry networks that allow us to identify and invest in high-potential secondary opportunities.”
To learn more, please visit https://launchbaycapital.com.
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SOURCE Launchbay Capital
