Getting in is harder than getting out

Secondary narratives miss the point, the card flip matrix, and a cool conference

There’s lots of discussions about the “liquidity crisis” in venture with different ideas for how to solve it. The importance and potential variability of secondary has at this point become a meme: continuity vehicles, secondary brokers, strip sales, illiquid stock distributions, etc.

A common theme here is that there’s “no liquidity for my assets” which leads to a lot of handwringing around structural / transactional / mechanical solutions to the liquidity “problem.”

But as my partner Will puts it, there's plenty of liquidity, just not at the price you want.

The issue isn’t that there’s no liquidity for quality assets; it’s that most of the assets are low quality. This is THE defining feature of venture and startups. No one should be surprised!

Obviously lots of money has been lost blowing great opportunities to sell. Obviously selling well and having the discipline to do it matters. And obviously secondary will be more important for seed funds as the time to exit gets longer.

But selling is obviously downstream of having anything saleable/worth owning in the first place. It’s just more comfortable to talk about the challenges of selling than the challenges of having nothing anyone wants to buy.

So rather than obsessing on how to get out of assets, focus on the hard part: getting in. If you actually have an asset worth owning, getting out won’t be hard and parting with it will be.

This should not be an interesting point (maybe it isn’t) but I think it has to be said. Venture capitalists’ agita and anxiety about their careers and the markets is getting funneled into intense selling and secondary pressures. None of this ultimately helps founders build businesses. It’s all just zero sum trading.

If you DO want to read some actually good things about secondary in venture, read these:

• Praise Our Lord For Secondary Markets - Hunter Walk

• Secondaries will not save VC - Random Walk

• Unlocking liquidity in VC the old fashioned way - Will Quist x Random Walk

Sam is also cooking up something fun here.

I Read

Card-flip Matrix as a core world view model for startups - Cameron Priest

Self aggrandizing because I am heavily quoted here but this is a great long form tweet/mini blog post on the way we try to push founders. Cam rocks.

Why VC and software have PE envy - Matt Brown

Good chart:

Matt is doing an invite-only conference in September that I’d love to go to but it’s like 2 days after my wedding so ain’t gonna happen. You should apply to join though! Make it successful so he does it again so that I can go next year.

Podcast

My episode on the Franchise Secrets podcast just went up on youtube, spotify, etc.. I went on to talk about what venture and startups can learn from franchising, the opportunity for real world startups, and how we’re backing SMBs generally. Fun pod.

I Wrote

• Getting in is obviously more important than getting out.

• How 15 ops leaders are (and are not) using AI. What we heard at our COO dinner this week.