In a recent ION Influencers fireside chat that demystified one of private markets’ hottest strategies, Ben Slome, Founder of New Vintage Partners, provided a masterclass on the seismic shift occurring in venture and growth secondaries. Moving beyond the hype, Sloane framed this niche not as a simple liquidity tool, but as a sophisticated hunting ground for asymmetric returns, powered by a historic $1.3 trillion shortfall in distributions.

His insights reveal a market ripe for a private equity-style revolution, where disciplined diligence and flexibility can unlock alpha that massive, scaled players are structurally unable to capture.

Here are the key topics and takeaways for LPs and GPs navigating this evolving landscape.

The End of the Stigma: Secondaries as an Institutional “Lever”

Slome traced the rapid evolution in perception, noting that secondaries have shed their “dirty word” status.

• The Yale Catalyst: When an institution like Yale used the secondary market to generate $6 billion in liquidity, it signaled a fundamental shift. Secondaries are no longer a signal of distress but a “bonafide institutional lever” for strategic portfolio management.

• For LPs, Two Key Use Cases:

  1. Portfolio Acceleration: For newer investors, it’s a way to build instant vintage and manager diversification “with one or two checks.”

  2. DPI Supplement: For mature portfolios, it provides cash flow during the broader “liquidity crunch,” offering returns while the rest of a portfolio matures.

The Alpha Formula: Size, Selectivity, and “Tales of Two Cities”

Slome identified where true opportunity lies, distinguishing his firm’s approach from the giants of the industry.

• Alpha Source #1: Flexibility on Size. 95% of secondary capital targets huge, multi-hundred-million-dollar deals. This leaves a vast “lack of capital” for transactions below $250M—precisely the size of most venture/growth fund stakes. Being able to execute $5M-$100M deals is a structural advantage.

• Alpha Source #2: Asymmetric Diligence. Slome criticized the “index-building” approach in venture as “dangerous.” New Vintage employs a “private equity style” bottoms-up process on each asset, aiming to “buy a dollar for sixty cents” with high confidence it won’t fall below ninety cents.

• The “Tale of Two Cities” in Companies:

  • City 1 (The Headliners): Firms like Anthropic or Databricks. The goal is to separate fundamentally strong businesses from those buoyed by “mania” and expensive beta.

  • City 2 (The “Cloudwalks”): The sweet spot. Profitable, fast-growing businesses (e.g., CloudWalk, a payments processor) that don’t attract retail hype but trade at “downside protected” levels. “There’s a lot of alpha in finding companies like that.”

The Venture Secondary Market: A $300-to-1 Supply Glut

Slome presented a staggering data point that defines the market opportunity:

• The Liquidity Shortfall: Approximately $1.3-$1.4 trillion of capital invested in venture/growth over the past 15 years is still waiting for a return (“negative net DPI”).

• Extreme Capital Imbalance: In large-cap secondaries, dry powder covers 70-80% of supply. In venture/growth, the ratio is inverted: for every $300 of supply needing liquidity, there is roughly $1 of dedicated capital. This creates a massive, inefficient market for disciplined buyers.

The Future Ecosystem: Beyond LP Stakes

Looking ahead, Slome predicted the secondary market will expand beyond traditional LP stakes into new liquidity solutions:

• GP Financing: Helping GPs finance illiquid carry or manage their own balance sheets.

• Democratizing Continuation Vehicles: Servicing the “tale of two cities of GPs”—elite firms get bank attention, but there’s an “enormous opportunity” to help high-quality, subscale GPs run continuation processes.

Red Flags: The Three-Layer Diligence Filter

Slome outlined a rigorous framework for filtering deals, with red flags at each level:

1. The Company: Poor fundamentals (lack of profitability, weak retention) and an unclear path to liquidity within the fund’s life.

2. The Fund Agreement (LPA): Terms that misalign incentives, e.g., no time limit on management fees, suggesting a GP may lack urgency to generate returns.

3. The GP Itself: A track record of high paper valuations (TVPI) but low actual distributions (DPI). “A ten x on paper… but in year nine, there’s 0.1x DPI” is a major warning sign.

Key Takeaways for the Industry:

• For LPs: Venture/growth secondaries have matured into a distinct asset class. The most compelling strategies offer more than just beta; they provide downside protection and asymmetric returns through intense selectivity.

• For GPs: The secondary market is becoming a core component of the liquidity ecosystem. Understanding the metrics that secondary buyers prioritize (DPI, clear exit catalysts) can strengthen fund positioning.

• For Talent: The sector offers a “steeper growth trajectory” and entrepreneurial opportunity compared to saturated traditional PE, attracting professionals seeking to build a market alongside investing in it.

• The Bottom Line: As Ben Slome articulated, the venture secondary market is transitioning from a niche liquidity solution to a premier arena for value investing. The winners will be those who combine the flexibility to act where giants cannot with the operational diligence to find hidden gems in a sea of unmet demand.

Key timestamps:

00:07 Introduction to the Fireside Chat
01:41 The Rise of Secondary Investing
03:06 Changing Perceptions of Secondaries
04:41 Approach to Secondary Market Investments
06:20 Identifying Alpha in Secondary Markets
09:44 Evolving Diligence in Investment Strategies
12:19 Lessons from Private Equity for Venture Secondaries
14:43 Future of Secondaries in Asset Management
17:01 Talent Acquisition in the Secondary Market
19:50 Market Opportunities and Deal Flow
22:16 Assessing Quality and Red Flags in Investments
24:35 Conclusion and Closing Remarks