The Secondaries Stigma

Secondary firms are kind of like the Betty Ford Centers of the venture business. Ask a VC what he thinks about them, and he’ll typically say they provide a much needed service, but he has never actually needed to use such a service himself. Right, just like Amy Winehouse has never gone to rehab.

The stigma associated with secondaries is bizarre. Sure, I get the part about failure. But both VCs and buyout pros long ago embraced failure as a normal part of their business. I guess a VC feels comfortable saying he won’t back an entrepreneur who has never failed before, but failure of a VC fund is another matter. Why? VC is among the riskiest businesses in the world. It stands to reason that many VC firms will fail, just like most startups will fail.

If I were an LP, I’d want to see a VC do everything in his power to make his first fund a success—even if it meant my return would shrink. I’d rather have 10% of something than 20% of nothing.

For those who’d like to read more about this topic, click here for this month’s cover story in Venture Capital Journal. (The story is free to non-VCJ subscribers for today only, so read quickly)

And for those of you who’d like to meet Connie Loizos, the author of the cover story, or one of the secondary experts she quoted, please come visit us next Wednesday, April 9, at the Quadrus Conference Center in Menlo Park, Calif. The cost is just $60, with a $25 discount for VCJ subscribers. For tickets, call Angelica Vicioso at (646) 822-3570 or shoot her an email

More details are here. Hope to see you there…