Exits Matter

When Hany and I decided to start ACME Capital, we went on a hike to work through the details. I vividly remember a central debate (the first of many): whether sourcing or exiting companies was more important. Hany was adamant that exiting, at minimum, deserves a position equal to sourcing.

He was right; and he loves being right. In today's Venture 4.0 environment, this insight has proven critical to survival.

→ A defining challenge of Venture 4.0 is the stockpile of unicorns stuck in private purgatory. This "liquidity debt" left by the previous era must be addressed, and how we address it will fundamentally shape this next phase

→ The capital recycling loop - VCs returning capital to LPs, LPs recommitting to VCs - is breaking down, endangering future innovation financing. This is an ecosystem-wide problem requiring an ecosystem-wide solution

→ Today's secondary funds are thriving ($162B 2024 volume) and offer a critical but partial path forward, yet this volume is still dwarfed by the sheer scale of the $2.7T unicorn backlog that continues to expand daily

→ Investment bankers won't solve this; they're transaction-focused and excel at optimizing deals that are ready, not manufacturing exits from scratch

→ Founders shouldn't be expected to solve it; their singular focus on building exceptional businesses is precisely what creates exit optionality in the first place

→ A large part of the responsibility falls on us as VCs. Exits are one of the most critical parts of investing - arguably the hardest part - especially in challenging markets

→ We can not be passive participants in venture’s exit ecosystem

→ The days of "invest and hope" are behind us. Being a venture capitalist in Venture 4.0 means we cannot simply monitor quarterly board decks and offer support - we must align with the Founders and actively architect and pursue exit solutions for our portfolios

→ This means getting creative: driving consolidation among portfolios, developing meaningful relationships with strategic acquirers, building connections with PE firms, exploring joint ventures, and dare I say, even revisiting SPACs and other creative paths to liquidity

→ My dad (“Big AL”) would say we need to get off our keisters. If you don't know how to actively drive exits for your portfolio companies, you're not delivering the full value you promised to your founders and LPs

→ To thrive in Venture 4.0, VCs need to roll up their sleeves, leverage their networks, and manufacture liquidity - rather than hope and wait for it to appear

Pictured: Hany and I on that fateful hike. Hopefully, this post counts as a sufficient 'I told you so' for him ;).