#237 Secondaries Are (Finally) a Core Part of Seed VC
There was a time when secondaries felt like a shady side alley of venture capital—reserved for insiders, distressed sales, or late-stage cleanup. In 2025? That stigma is dead.
Hunter Walk (Homebrew) just published a killer post walking through why secondaries are now essential for seed-stage investors—not optional. It’s the kind of post that reframes where the whole early-stage game is headed.
The Role of Secondaries in the New VC Playbook
Walk makes it clear: secondaries aren’t just about returning cash to LPs—they're about recycling capital inside firms so they can keep supporting their best startups. Early liquidity means small funds can back pro rata rights, bridge rounds, and other critical capital needs without waiting a decade.
He also quotes Charles Hudson (Precursor Ventures), who predicts that for funds like his, "selling stock of private startups to other investors will make up 75–80% of LP distributions over the next five years." That’s a major shift.
And it’s not just anecdotal: Tomasz Tunguz has analyzed the data and confirmed it—secondaries aren’t a blip; they’re a structural evolution in venture capital.
The vibe shift? The old “buy and hold forever” mentality is fading fast. The new mindset: buy…and maybe sell if it helps your portfolio, your LPs, or your sanity.
Let’s dig into why secondaries are now a must-have tool for every seed fund.
Key Takeaways
🕰️ Longer Exit Timelines Break the Traditional VC Model
Startups are staying private longer. We all know this. But Hunter nails what that really means:
The average time to liquidity has stretched from 7–10 years to 10–12+.
That adds real pressure to fund timelines (LPs don’t want to wait 15 years).
Early funds need options beyond “just wait for the IPO.”
This isn’t just annoying—it reshapes how early-stage fund managers model DPI, plan reserves, and talk to LPs.
🧩 Alignment Fractures After Series A
One of the most useful frameworks in Hunter’s post is how early investors go from aligned to… not. By Series A, large funds enter the cap table with different goals (think: $1B+ returns vs. 3–5x MOIC).
As he puts it, early investors essentially become common stockholders. That changes your calculus as a seed investor—you're not just betting on upside, you're managing downside without much control.
💸 Secondaries = Liquidity, Optionality, Survival
Hunter and folks like Charles Hudson (Precursor) make the case that secondaries aren’t just a way to return money to LPs—they’re a way to stay in the game.
Recycled capital helps seed funds:
Support pro rata rights
Bridge portfolio companies through tough spots
Free up dry powder for new bets
Charles estimates that 75–80% of LP returns at Precursor over the next five years will come from secondaries. That’s a huge shift.
💼 Secondaries Are No Longer Sketchy
There’s a real difference between secondaries now vs. even five years ago. Hunter points to how far the infrastructure has come:
Trusted buyers and brokers exist
Legal processes are clearer
More founders are on board (especially if it cleans up the cap table)
That doesn’t mean there aren’t risks, but the path is way less murky.
🎯 VC = Trader?
Maybe the spiciest (and truest?) part of Hunter’s post is the idea that early-stage VCs need to start thinking like traders.
We’re not just “HODLing” anymore. We're managing positions—buying, trimming, or exiting—based on market dynamics, portfolio needs, and LP expectations. It’s a mindset shift, and not every GP is ready for it.
🔁 Final Take
If you’re managing a seed fund in 2025 like it’s still 2015, you’re going to struggle.
The name of the game isn’t just picking winners anymore. It’s:
Managing liquidity
Aligning incentives
Using secondaries to stay agile
Hunter said it best: “I think friendly secondaries are easy, everything else feels new.”
And that’s exactly the point—secondaries aren't a backdoor strategy anymore. They’re the new normal.
Summary table: why ‘buy and hold’ is being replaced by ‘buy and maybe sell’ — see below
That’s all for today folks! Thanks for your support and spreading the word! Share this on Twitter or LinkedIn to help grow “the crew!”
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