Venture Capital Outlook: Despite Slow Volume, Liquidity Prospects Remain

• Driven by a group of aging, more cash-efficient businesses, we see ample opportunity for the IPO markets to open up for VC-backed listings.
• We maintain our expectation to see continued use of alternative liquidity routes, with various private tech-focused SPACs already coming to market.
• As the Spotify direct listing nears, we believe the massive trading volume seen in its direct secondary shares may help better price the final listing. Should this be the case, we think that direct secondaries may become a mainstay in the late-stage venture markets.

Despite pure exit activity coming in relatively subdued through the first part of the year, we actually see ample opportunity for VC-backed public offerings to pick up steam as we continue to progress through the next few quarters of 2018. Late-stage capital is certainly available to continue funding such companies, however, we see a plethora of increasingly mature companies that have been able to build cash-efficient business models that are attractive to institutional shareholders on the public side. In our opinion, this has been a factor of some natural maturation of the general venture market, in addition to the aging of many of the subscription-based software businesses that have received venture funding over the last decade or so.