Compare Options
Venture fund liquidity options, compared.
Six ways a venture fund or its LPs can turn NAV into cash. They differ in who gets the cash, what it costs, how much upside is kept and who has to approve it.
At a glance
Six options, side by side
| Option | How it works | Who gets cash | Cost to LPs | Upside kept | Approvals | Best fit | Main drawback |
|---|---|---|---|---|---|---|---|
| Distribution financing (preferred strip) | An investor advances a share of NAV and is repaid first from distributions, up to a fixed return | All LPs, pro rata; or a single LP at the LP level | A fixed preferred return, capped | Full, once the strip is repaid | LPA authority and LPAC at the fund level; GP acknowledgment at the LP level | Mature funds with marked-up NAV and low DPI, confident in their marks | Costs more than a secondary sale if the portfolio falls short of its marks |
| LP secondary sale | An LP sells its fund interest to a secondary buyer | The selling LP only | Discount to NAV, often steep for venture interests | None on the interest sold | GP consent to transfer; ROFR if the LPA has one | An LP that wants a full, permanent exit | Locks in the discount and gives up all future upside on what's sold |
| GP-led strip sale | The fund sells a slice, often 10–30%, of every position to a buyer | All LPs, pro rata | Discount to NAV on the slice sold | Remaining portion only | LPAC; company transfer consents and ROFRs on each position | Funds that want DPI and are willing to sell part of the portfolio | Sells upside at a discount; transfer friction across many companies |
| Tender offer | A buyer offers to purchase interests from any LP that elects to sell | Electing LPs only | Discount to NAV, set by the buyer | Full upside for LPs who stay | GP and LPAC; a fair process for all LPs | Funds where some LPs want out and others want to stay | Only helps sellers, and only at the buyer's price |
| Continuation vehicle | The GP moves one or more assets into a new vehicle; LPs sell or roll | LPs who elect to sell | Pricing set by a lead buyer; often near NAV for strong assets | Full for rolling LPs; reset economics for the GP | LPAC; often a fairness opinion; registered adviser required in practice | One or a few concentrated winners needing more time | GP on both sides of the trade; LPs face a sell-or-roll decision |
| NAV loan | A lender advances against the fund's portfolio, repaid with interest | All LPs, if distributed | Interest at private-credit rates | Full | LPA borrowing authority; often LPAC | Funds with diversified, yielding or near-liquid assets | Maturity and loan-to-value tests; few lenders lend against venture NAV |
Yantacaw provides distribution financing. The other rows describe options offered by secondary funds, lenders and GPs generally. Read the full liquidity guide.
Choosing
Which option fits
- You want DPI for every LP and believe your marks
- A preferred distribution strip. You keep the upside and pay a fixed cost instead of a discount.
- You want DPI for every LP and expect marks to fall
- A GP-led strip sale. Selling at a discount today costs less than a fixed return if the portfolio underperforms.
- Some LPs want out, others want to stay
- A tender offer, or a continuation vehicle if the value sits in a few assets.
- One company is most of the fund's value
- A continuation vehicle. Diversified-portfolio tools, including strips and NAV loans, size poorly against one asset.
- You're an LP who needs cash but wants to keep your exposure
- An LP-level preferred strip against your interests. A secondary sale if you want a clean, permanent exit.
- The portfolio includes large public or near-public positions
- A NAV loan sized against the liquid positions, or a strip with a higher advance rate.
Example
The same $60MM, two ways
Take a $100MM fund carrying $300MM of NAV. To put $60MM in LPs' hands, it can sell 25% of its interests at 80% of NAV, or take a $60MM preferred strip.
If the fund ultimately distributes $400MM, the sale costs LPs $100MM of future proceeds and the strip costs about $84MM. The strip is cheaper whenever the fund realizes more than about $337MM, roughly 112% of current NAV. Below that, the sale is cheaper. Run your own numbers.