The world of venture capital is constantly evolving, and one trend that has gained momentum in recent years is venture secondaries. To gain insights into this growing market, we recently sat down with Alberto Chalon, Founding Partner of Giano Capital, a leading European VC firm specializing in secondary transactions. In this blog, we will explore Alberto's views on the driving forces behind the growth of venture secondaries, the current state of the market, and Giano Capital's approach to risk management and LP offerings.
Venture secondaries were booming in the last few years. What was the driving force of this growth and what are the advantages of secondary transactions?
Companies are staying private longer than in the past. The direct effect is that investors must be more patient to get back their money. Secondary is the most logical tool to get some liquidity before the exit (M&A, IPO,…).
For companies, in order to attract and retain the best entrepreneurial talent in Europe, it is essential to provide some liquidity events for founders/management before the exit event (which takes longer and longer).
Providing liquidity solutions for company employees and early investors that will in turn reduce pressure on management from internal stakeholders (employees, early investors and board members) to undertake a rushed exit.
What is the current state of VC secondaries in Europe (considering the downturn economy)?
Today, the power is in the buyers’ hands. There are much more sellers than buyers. The market is also getting better organized in the secondary market where it is still lagging the US.
What advantages does Giano Capital have when investing in the secondary market compared to other VC firms?
Giano Capital can act rapidly, efficiently and use extensively its network in the sourcing of the most interesting secondary deals.
Today, there are not enough European offers and Giano Capital positions itself to be part of the solution. It will help the European ecosystem that tends to be dominated by discount-driven US-buyers.
What sets Giano Capital apart from other VC firms when it comes to offerings for LPs?
Giano Capital team acts in the center of the ecosystem. We position ourself in between our LPs and our portfolio companies and put them in contact to create synergies. Giano Capital’s GPs comes also with very different backgrounds (entrepreneur, operator/investor) from other traditional VCs offering a different point of view in the way they look at companies.
Considering the current downturn economy and the fall of startup valuations, how would you describe your approach to risk management and ensuring stability for your LPs?
We fundamentally believe that this is the right time to invest in VC – vintages following periods of dislocation have historically been the best performing, and we have the right team and strategy in place to capitalise on this opportunity.
How do you expect the VC secondary market will evolve in the upcoming months?
We think that the VC secondary market will be picking up in this market environment especially in Europe where it is lagging compared to the US.
It will be a segment with very promising risk returns characteristics as DPI of Funds are still low. You will see more and more discount driven opportunities coming from those Funds. The secondary market is still not very well structured here in Europe. Nevertheless, we are seeing more and more companies also willing to organize structured windows of secondary transactions for their employees.
As Alberto Chalon highlighted, the VC secondary market in Europe is still in its early stages but has vast potential. Giano Capital is well-positioned to leverage its expertise and network to identify the most promising deals in this market. To stay up-to-date on the latest developments in the venture capital industry, don't miss the upcoming 0100 Conference Mediterranean, an in-person conference that brings together PE & VC investors from the Mediterranean region, where experts like Alberto Chalon will share their insights and experiences.
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