StepStone Closes Largest-Ever Venture Capital Secondaries Fund

Rhea-AI Summary

StepStone Group (Nasdaq: STEP) has successfully closed its sixth venture capital secondaries fund, StepStone VC Secondaries Fund VI (VSF VI), raising $3.3 billion. This oversubscribed fund marks the largest ever exclusively focused on venture capital secondaries. Existing and new partners contributed to the fund, which aims to provide liquidity to founders and early investors in mature venture-backed companies. With venture capital AUM growing from $600 billion in 2014 to $3.3 trillion by 2023, StepStone leverages its vast data and integrated approach to capitalize on secondary market opportunities.

Positive

• StepStone successfully raised $3.3 billion for VSF VI, exceeding its target.
• Oversubscribed fund indicates strong investor confidence and demand.
• StepStone's venture capital AUM grew significantly, from $600 billion in 2014 to $3.3 trillion in 2023.
• VSF VI is the largest fund exclusively focused on venture capital secondaries.
• Strong participation from both existing and new partners.
• StepStone's integrated approach and vast data provide a strategic advantage in the secondary market.
• VSF VI aims to provide liquidity to founders and early investors in mature venture-backed companies.
• StepStone has a dedicated 75-person investment team for venture capital and growth equity.

Negative

• liquidity in the market could pose challenges despite the fund's significant size.
• Dependence on secondary market opportunities might limit growth if market conditions change.
• Extended exit timelines for venture-backed companies could affect liquidity.

Insights

Financial Analyst

StepStone's accomplishment in closing the largest-ever venture capital secondaries fund at $3.3 billion is significant. This fund, being oversubscribed, indicates strong demand and confidence from investors, both existing and new. For retail investors, it showcases StepStone's strong market position and trust within the investment community.

The venture capital market's growth from $600 billion in 2014 to $3.3 trillion by 2023 underscores the increasing importance of liquidity solutions in this space. This fund aims to provide interim liquidity, which is important given the extended exit timelines for venture-backed companies. This strategic positioning can lead to potentially strong returns, especially in a market with limited liquidity options.

From a financial standpoint, this move can enhance StepStone's revenue and profitability through management fees and carried interest from the fund. However, investors should be aware of the associated risks, including the long-term illiquidity and performance variability inherent in venture capital investments.

Market Research Analyst

The expansion of StepStone's venture capital secondaries platform highlights a key shift in the industry. Traditional exit avenues like IPOs and acquisitions are no longer the only paths to liquidity. Given the substantial amount of capital locked in older venture funds, the secondary market offers a viable option for liquidity that wasn't as prominent before.

This market evolution is reflected in the fund's strategy to provide liquidity to founders and early investors, purchase interests from limited partners and assist with structured solutions. For retail investors, this indicates a maturing market where secondary transactions are becoming mainstream, potentially leading to increased liquidity and valuation transparency for venture investments.

Investors should note, however, the importance of StepStone's extensive data and relationships in executing these strategies effectively. Without this advantage, secondary investments can be challenging due to pricing complexities and the illiquid nature of venture assets.

Venture Capital Expert

StepStone's new fund emphasizes their role as a critical player in the venture capital secondary market. The increased utilization of secondary markets is a testament to the growing need for liquidity among venture capital investors, particularly in a landscape where exit timelines are extending.

The fund's aim to provide structured solutions like portfolio strip sales and continuation funds is noteworthy. These innovative approaches can offer bespoke liquidity solutions that cater to different stakeholders' needs, helping stabilize the venture capital ecosystem and potentially leading to more predictable returns.

For the retail investor, this evolution signifies a shift towards more sophisticated financial instruments within the venture capital market, which could translate into better risk management and enhanced returns over the long term. However, it's essential to remain cautious of the inherent risks and the need for comprehensive due diligence in such investments.

StepStone VC Secondaries Fund VI Closes Above Target with $3.3 Billion of Capital Commitments

NEW YORK, June 05, 2024 (GLOBE NEWSWIRE) -- StepStone Group Inc. (Nasdaq: STEP), a global private markets investment firm focused on providing customized investment solutions, advisory, and data services, today announced that it has raised $3.3 billion for StepStone VC Secondaries Fund VI, L.P. ("VSF VI"), the firm’s sixth secondaries fund focused on opportunities in the venture capital asset class. The oversubscribed fund had strong participation from existing investors, as well as select new limited partners. It represents the largest fund exclusively pursuing venture capital secondaries raised to date.

StepStone Group launched its inaugural venture capital secondaries fund in 2014 when the venture capital market was an order of magnitude smaller. Strong performance over the last decade, coupled with limited liquidity in recent years, has driven significant growth. Assets under management in venture capital have expanded from approximately $600 billion in 2014 to around $3.3 trillion at the end of 2023, with approximately half of that value concentrated in older funds (2010 – 2018 vintages).¹ The AUM held by venture funds, at times labeled a small market, now represents 64% of the assets held by traditional private equity funds and has grown by 123% since 2014.²

“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,” said John Avirett, Partner at StepStone. “With exit timelines extending by several years and trillions of dollars locked up in illiquid private companies, that mindset is starting to change. Shareholders of venture-backed companies, limited partners, and fund managers are increasingly turning to the secondary market as a tool for interim liquidity. We are in a privileged position to help each of these parties achieve their goals through the solutions we offer.”

In keeping with the firm’s longstanding strategy, VSF VI seeks to provide liquidity to founders and early investors in mature venture-backed companies, purchase interests in venture capital funds from limited partners, and assist fund managers with structured solutions such as portfolio strip sales, tenders, and continuation funds. StepStone’s venture capital platform spans fund and direct investments on both a primary and secondary basis, helping the firm capitalize on the flywheel effects of an integrated approach.

“StepStone has grown to become one of the largest allocators to venture funds globally. With deep relationships, vast data on venture-backed companies, and a 75-person investment team dedicated to venture capital and growth equity, we believe we are well positioned to effectively diligence, price, and structure a broad range of secondary opportunities,” said Hunter Somerville, Partner at StepStone. “We are humbled by the support of new and existing investors in the fund. We look forward to executing on our mission of seeking strong returns by financing innovation.”

About StepStone Group

StepStone Group Inc. (Nasdaq: STEP) is a global private markets investment firm focused on providing customized investment solutions and advisory and data services to its clients. As of March 31, 2024, StepStone was responsible for approximately $678 billion of total capital, including $157 billion of assets under management. StepStone's clients include some of the world's largest public and private defined benefit and defined contribution pension funds, sovereign wealth funds and insurance companies, as well as prominent endowments, foundations, family offices and private wealth clients, which include high-net-worth and mass affluent individuals. StepStone partners with its clients to develop and build private markets portfolios designed to meet their specific objectives across the private equity, infrastructure, private debt and real estate asset classes.

Contacts

Shareholder Relations:
Seth Weiss
shareholders@stepstonegroup.com
+1 (212) 351-6106

Media:
Brian Ruby / Chris Gillick / Matt Lettiero, ICR
StepStonePR@icrinc.com
+1 (203) 682-8268

¹ PitchBook: “Global Private Market Fundraising Report”, published December 4, 2023.
² PitchBook: “Global Private Market Fundraising Report”, published December 4, 2023.

FAQ

What is StepStone VC Secondaries Fund VI?

StepStone VC Secondaries Fund VI (VSF VI) is StepStone's sixth fund focused on venture capital secondaries, raising $3.3 billion to provide liquidity solutions to founders and early investors.

How much capital did StepStone raise for VSF VI?

StepStone raised $3.3 billion for VC Secondaries Fund VI.

Why is StepStone VC Secondaries Fund VI significant?

VSF VI is the largest fund exclusively focused on venture capital secondaries, demonstrating strong investor confidence and demand.

What does StepStone aim to achieve with VSF VI?

StepStone aims to provide liquidity to founders and early investors in mature venture-backed companies and capitalize on secondary market opportunities.

How has the venture capital market grown according to StepStone?

The venture capital market has grown from $600 billion in 2014 to $3.3 trillion by the end of 2023.

What is the stock symbol for StepStone Group?

The stock symbol for StepStone Group is STEP.