This piece explains venture secondaries—buying and selling stakes in private startups. Ravi Viswanathan of NewView Capital sees this market growing from $200B to $1T over a decade, driven by longer IPO timelines and VC asset bloat. He warns against fixating on 'discounts' and instead focuses on intrinsic value. No specific companies are named, but the strategy targets enterprise software and fintech.
At a Glance NewView Capital founder and managing partner Ravi Viswanathan discussed the increasingly important venture capital secondary market in a program. He noted that while each secondary transaction is unique due to the customized nature of the private market, there is consistency in transacti
Ravi Viswanathan (Founder and Managing Partner of NewView Capital) delves into the venture capital secondary market in this program. He began his career in secondary trading at Goldman Sachs during the post-internet bubble era, and nearly two decades later, his fund NewView has made secondary trading a core strategy. Ravi Viswanathan argues that the venture capital secondary market is transitioning from the periphery to the mainstream. This is not a cyclical phenomenon but a long-term trend driven by three structural forces: the lengthening time to IPO for companies, the power-law distribution effect, and the swelling scale of VC assets. He projects that the market will grow from approximately $20 billion to the $100 billion level over the next decade.
Ravi Viswanathan argues that the market holds a fundamental misunderstanding of the prevalent "discount" pricing approach in secondary transactions, and that the correct pricing framework should be based on intrinsic value rather than comparisons with the previous round's valuation.
Ravi points out that the concept of discounts in secondary transactions originates from the private equity sector — where PE firms are comparable (similar EBITDA margins and transaction multiples), making "discount" a meaningful reference. However, the venture capital space is entirely different: valuations of companies across different industries, stages, and financing timelines vary significantly, and the previous round's valuation is "merely the price an investor was willing to pay at that time," lacking comparability.
He introduces the concept of the "fallacy of discounts": "I can show you companies we bought at par or at a 5% discount that are of far higher quality than those bought at a 50% discount." NewView's pricing approach evaluates intrinsic value from multiple dimensions such as growth and efficiency metrics, determining a reasonable price that can support LP returns. In the current environment, intrinsic value analysis often yields prices below the previous round's valuation, but this is a result rather than a starting point.
Key data support: The secondary market has grown from approximately $40 billion a decade ago to around $150 billion (roughly 13% CAGR); the venture capital segment has grown from about $3 billion to around $20 billion (approximately 20-25% CAGR), and venture capital's share of the overall secondary market has risen from low single digits to high single digits or low double digits.
Ravi Viswanathan points out that seller motivations are undergoing a fundamental shift: from the passive behavior of "having to sell" to a structural need for top fund managers to actively manage their portfolios, with the stigma of secondary transactions rapidly dissipating.
Sellers can be categorized into three main types, each with distinct motivations:
| Seller Type | Core Motivation | Price Sensitivity |
|---|---|---|
| VC Funds (GPs) | Need DPI to meet LP return requirements; mismatch between fund duration and company listing timeline (funds last 10 years, companies take 12-14 years to go public) | Relatively high — must face book value write-downs |
| Individuals/Angel Investors | Pure liquidity needs | Relatively low — no mandatory cost basis |
| Employees/Former Employees | Liquidity needs after waiting 12-14 years | Medium |
Ravi emphasizes that "over the past 12-18 months, the tone of conversations has shifted significantly" — an increasing number of VC funds recognize that waiting for IPOs and M&A is merely "a drop in the bucket," and they must actively manage their portfolios. He cites data: the total VC ecosystem is approximately $4 trillion, with only a few hundred billion dollars exiting annually through IPOs and M&A; out of 56,000 VC-backed companies, fewer than 3,000 exit each year — implying a 15-20 year backlog.
Key Judgment: Ravi believes secondary transactions are transitioning from "evangelical selling" (requiring market education) to "active inbound inquiries" — in the six years since NewView was founded, the firm has engaged in substantive conversations with over 40 GPs in just the past year, covering thousands of companies.
Ravi Viswanathan articulates NewView's unique buyer strategy: building "influence asymmetry" through operational value-add — achieving influence far exceeding ownership at a much lower stake than traditional VC, thereby establishing a competitive edge in information-scarce markets.
Core strategic elements:
1. Seeking influence, not control: Through deep relationship-building and operational value-add, achieving a "non-linear relationship between influence and ownership." Even without a board seat, a close partnership with the CEO can be established.
2. Thematic focus: Over 90% of investments are concentrated in enterprise software and fintech — the two areas at the core of Ravi's 25-year career. The team includes operating partners with hands-on experience (in marketing, finance, and product).
3. "Company-first" due diligence approach: When engaging with GPs, NewView adopts a "highly curated" approach — not passively accepting an entire batch of assets, but screening company by company. "We are buying an interest in individual companies, and the only way we know how to buy is to take a company-first due diligence approach."
4. Flexible capital: Active in both secondary and primary markets, which can be executed simultaneously, sequentially, or built up gradually from small positions. "This business is already hard enough to generate excess returns; having flexible capital deployment is very powerful."
Cracking information asymmetry: Ravi reveals that they often begin providing value-add services to potential target companies (e.g., helping build teams, optimize market strategies) before even entering the shareholder register. This "give first, take later" approach is key to building trust and gaining deep information. "Sometimes it takes 3, 6, 9, or 12 months to build a relationship. When they see our value, they open the vault."
Ravi Viswanathan predicts that "GP-to-GP transactions" in venture capital—where one VC fund transfers portfolio company shares to another VC fund—will replicate the successful trajectory seen in private equity, becoming a new and significant source of liquidity in the secondary market.
Ravi notes that sponsor-to-sponsor transactions have existed in the PE space for decades but have yet to truly take off in VC. "I think this will become a new, important liquidity goldmine." Factors driving this trend include:
Key Analogy: Ravi compares the development path of the VC secondary market to that of the PE secondary market—the latter has already evolved a mature ecosystem, including sponsor-to-sponsor transactions, specialized intermediaries, and standardized processes. VC is undergoing the same evolution, albeit at an earlier stage.
Competitive Landscape: Ravi believes that if this market truly reaches a scale of $100 billion, more participants will inevitably enter. However, competition is more "situation-specific and company-specific"—the main competitors are existing investors on the cap table (who want to increase their stakes), rather than other secondary funds. NewView does not engage in LP secondary transactions (i.e., purchasing fund stakes) and focuses on direct company-level transactions.
Ravi Viswanathan argues that the market has shifted from "growth at all costs" to "efficiency-driven growth," with the Rule of 40 (growth rate + operating margin ≥ 40) becoming the new benchmark. However, growth and profitability are not equivalent—one dollar of growth is worth approximately 2.5 dollars of profit.
Ravi emphasizes that this shift is healthy: "Capital-driven growth works well in a zero-interest-rate environment, but it can mask product-market fit—you're just throwing money at it." NewView has adopted an efficiency-oriented growth philosophy since its inception, tracking 8–10 underlying metrics beyond the growth rate to measure the return on every dollar invested.
Key data: Ravi notes that the era of 20–30x revenue multiples at IPO in 2021 is over. Among major tech IPOs over the past 18 months, the market is willing to pay 8–10x revenue multiples, but high-quality companies that consistently "beat and raise" can achieve 15–20x. "The market still loves growth, but it won't pay a premium for uncertain growth."
Impact on secondary transactions: Ravi believes that efficiency-oriented companies are naturally better suited as M&A targets (for strategic buyers or financial sponsors), while high-growth, high-loss companies need the IPO market to reopen. NewView's exit strategies include IPOs, strategic M&A, and financial sponsor M&A—all three of which have been realized.
This section discusses market structure and does not involve specific company positions.
1. "The Discount Fallacy" (Ravi Viswanathan): Secondary transactions should not be priced based on "a discount to the last round valuation," but rather on intrinsic value analysis. "I can show you companies we bought at par or a 5% discount that are far higher quality than those bought at a 50% discount." The last round valuation is merely "a price one investor was willing to pay at that time" and lacks comparability.
2. 15-20 Years of Backlog (Ravi Viswanathan): The VC ecosystem totals approximately $4 trillion, with annual exits of only a few hundred billion dollars; fewer than 3,000 of 56,000 companies exit each year. "No matter how you calculate it, this is 15-20 years of backlog." This means the secondary market is not a cyclical phenomenon but a structural demand.
3. Asymmetric Influence (Ravi Viswanathan): NewView builds "non-linear influence-ownership relationships" through operational value-add—achieving influence far exceeding its ownership stake at a much lower shareholding than traditional VC. "We seek influence, not control." Even without a board seat, it can establish close working relationships with CEOs.
4. The 2.5:1 Rule for Growth vs. Profitability (Ravi Viswanathan): The value of one dollar of growth is approximately equal to $2.50 of profit. "A company with 30% growth and 10% profit margin under the Rule of 40 is far superior to one with 20% growth and 20% profit margin." However, this cannot be extrapolated indefinitely—companies with 60% growth but losses will still be penalized by the market.
5. GP-to-GP Transactions as a New Engine (Ravi Viswanathan): Sponsor-to-sponsor transactions in the VC space will replicate the successful path seen in PE. "Companies don't need to exit; they only need to exit your portfolio." This shift in mindset will unlock enormous liquidity.
6. "Give First, Then Receive" Information Strategy (Ravi Viswanathan): NewView often begins providing value-added services to potential target companies before even entering the shareholder register. "Sometimes it takes 3, 6, 9, or 12 months to build a relationship. When they see our value, they open the vault." This is the core method for overcoming information asymmetry.
7. Shift from "Evangelical Selling" to "Inbound Inquiries" in the Secondary Market (Ravi Viswanathan): Six years ago, NewView had to educate the market; now, a large number of GPs proactively reach out. "Over the past 12-18 months, the tone of conversations has shifted significantly"—VC funds recognize that waiting for an IPO is merely "a drop in the bucket."
8. The New Normal for the IPO Market (Ravi Viswanathan): The era of 20-30x revenue multiples in 2021 IPOs is over; the current market is willing to pay 8-10x. "The market still loves growth, but it won't pay a premium for uncertain growth." High-quality companies that consistently beat and raise can still achieve 15-20x multiples.