Welcome to the very last issue of The Exchange! With TechCrunch+ sunsetting this month, the The Exchange column and its newsletter are also coming to an end. Thank you for reading, emailing, tweeting, and hanging out with us for so many years.
P.S. A special thanks from myself to Anna, who was nothing short of a brilliant lead author for this newsletter since taking it over. She deserves endless credit for her work on the email.
Today on The Exchange
We’re digging into continuation funds, counting down through some of our favorite historical Exchange entries, and discussing what we’re excited to report on for the rest of the year! — Alex
Continuation funds
Continuation seemed like an apt theme from our perspective. It is also a very topical one: “The greatest source of liquidity now is going to be continuation funds,” VC Roger Ehrenberg predicted in a recent episode of the 20VC podcast.
In case you aren’t familiar with the term, let’s turn to the FT for a definition:
Continuation funds, which are common in private equity [PE] but rare in venture capital [VC], are a secondary investment vehicle that allows them to “reset the clock” for several years on some assets in old funds by selling them to a new vehicle that they also control. This helps a VC fund’s backers, known as “limited partners,” to roll over their investment or exit.
If you have been following the last few months of venture capital activity, the “why now?” is easy to answer. As the StepStone Ventures team told our colleague Becca Szkutak in her December 2023 investor survey: “With portfolios awash in unrealized value, fewer immediate exit opportunities, and longer hold periods on the horizon, GPs are beginning to get creative in order to generate liquidity.”
In practice, a continuation fund sees new investors invest in existing portfolios, but “it reflects today’s valuations,” Ehrenberg said. This repricing and the potential conflict of interest around it sound challenging in theory, but Ehrenberg doesn’t think so. “You have net new investors looking at a portfolio, so they’re the price setter, not the existing manager.”
It’s not just very large funds like Insight Partners and Lightspeed that can explore this option, either. “It’s a viable strategy for a decent swath of the venture industry,” Ehrenberg told 20VC host Harry Stebbings.
Whether it’s continuation funds, strip sales or secondaries, there’s a clear impetus for VC to look for solutions to its often ill-timed cycles, as we had already seen with the rise of permanent capital and publicly listed funds. A common thread in today’s economy is that projects and companies aren’t given the time they need to fully succeed, so even if it supposes a temporary discount, it’s good to hear that net investors are prepared to give portfolios more time to shine.
RIP The Exchange
The Exchange began its life in late 2019, before it even had a name. It quickly became a daily column during the week, and later this weekend newsletter. For those of you interested in the historical quirks of building media products, The Exchange was a TechCrunch+ product on the site, but its weekend issue was sent out for free as an email. Why was that the case? Because at the time we didn’t have the internal tech to send out subscriber-only emails!
Over the life of The Exchange on TechCrunch+ we shipped more than 1,000 columns and newsletters, making it the largest and — if we may — most impactful single project for driving subscribers to what was our paid product. The Exchange and TC+ were inseparable, so it makes sense that they are being retired together. Still, as with any project that mixed both work and personal passion, we’ll miss it.
From its start, the $100 million ARR club and the early pandemic days replete with stock market collapses and fear, The Exchange was around to chronicle the 2020–2022 startup boom, and its later conclusion. We went from tallying monster rounds and a blizzard of IPOs to watching venture capital dry up and startup exits become rarer than gold. It’s been wild.
Anna took over The Exchange’s newsletter in early 2022, around the time that Alex became editor-in-chief of TechCrunch+. The columns continued to be a group project, but we had to divide and conquer to keep our output at full tilt.
Below is a list of some of our favorite Exchange entries. Of course, we couldn’t go back through the entire archive — which you can find here — so consider this a partial download of the hits:
- We’re not done
While The Exchange is shuttering, we still have big plans for coverage this year. Thankfully we’re both still at TechCrunch, so you are far from rid of us. Alex wants to work on unicorn health, the state of debt financing in 2024, and how AI will find purchase at the OS layer. Anna is curious about AI hubs beyond San Francisco, GP stakes investing and whichever S-1 we can get our hands on.
Thanks again for reading The Exchange’s post and newsletter. We’re so very grateful to have gotten to spend so much time with you on this project. Onward and upward!
