Building Liquidity Pathways: Why Our New Continuation Funds Matter (and why it is really hard to pull off)

Seed stage investing is one of the most rewarding jobs in the world. And, if you do it right, it can be extremely lucrative. 100x returns are not a pipe dream but an essential part of the return mix that keeps fund investors happy. There are a few very high highs and many more or less low lows in our world as venture investors.

By now, it is crystal clear that venture capital plays a pivotal role in transforming our societies toward innovation economies. Especially as a leading European VC, we sense a strong responsibility to prove that this asset class is highly attractive, so we can (as we must) grow it by an order of magnitude.

However, while long-term returns for VC funds are very attractive, especially in the top quartile, one Achilles' heel remains: the long path to liquidity.

The Liquidity Challenge

This should not come as a surprise. We invest in the earliest stages of a company, and we expect our most successful companies to generate hundreds of millions in revenue before an exit. Achieving this in less than 10 years is rare, even among the best. As a result, most funds need significantly more time than a decade before they achieve meaningful multiples on committed capital.

In the past, this was helped by earlier M&A exits and faster IPO timelines. Google went public after six years and Amazon after three. That simply does not happen anymore. Today, the average tech IPO comes 14 years after founding, and in Europe, the wait can be even longer.

This creates a fundamental challenge to the venture model, especially in Europe, where a meaningful share of capital still comes from private investors such as family offices, who often have shorter time horizons than large institutions.

Lessons from the US Market

The US venture market has been grappling with this problem for years and has already built a mature ecosystem of solutions. 

Continuation funds and GP-led secondaries have gone from rare exceptions to a standard part of the toolkit. According to industry data, more than $100 billion of GP-led secondary transactions closed globally in 2023, the majority of them in the US. Continuation vehicles accounted for a rapidly growing share of that activity, allowing funds to both return cash to LPs and double down on breakout companies.

In other words, what was once seen as exotic or even a sign of weakness has become normal. Many of the largest and most respected US funds have embraced continuation funds as a way to actively manage their portfolios, keep supporting their best founders, and still meet LP expectations on distributions.

Europe, by contrast, is still catching up. Many LPs have little exposure to or experience in these structures, and few GPs have built the internal capabilities to run them. Also, many of our most exciting companies are not yet global brand names, making it more difficult for global buyers to set a price. 

It is easier to position secondaries in European unicorns like Revolut or Mistral that are already global names, but the biggest upside often lies in companies not yet household names in the Bay Area.

That leaves European venture lagging its US peers, at precisely the moment when global investors are scrutinizing liquidity more than ever.

If we want European ventures to stand on equal footing, we need to close that gap.

Our Approach: Smart Arbitrage with Tailored Vehicles

The answer, as always in financial markets, is arbitrage: trading long-term upside for short-term cash returns at a discount. Do this in a balanced, smart way where you do not take all your chips off the table, and you can balance your portfolio returns in a way that looks more like public markets.

That is exactly the philosophy behind our new continuation funds, an inaugural €30 million anchored by Molten Ventures and Acurio Ventures, with a second €30 million vehicle expected in the coming weeks.

The €60M in commitments acquire partial stakes in a handful of high-performing companies from two of our earlier vintages. The structure provides immediate liquidity to our LPs while allowing these breakout companies more time, capital, and support to continue scaling. 

It is a win-win: investors realize returns without missing the long-term upside, and founders are not pressured into premature exits. In today’s venture landscape, that combination is rare and powerful.

In contrast to large, well-covered transactions by Lightspeed, NEA, or HV and Lakestar in Europe, Speedinvest is a seed-focused fund with many of our most exciting assets still not in pre-IPO territory.

This reality, which we share with the vast majority of our peers in Europe, asks for a different approach than setting up one massive continuation vehicle every few years. We needed to be more nimble, flexible, and ultimately designed a different process than these later-stage focused funds. 

Our continuation funds are not one-off transactions. They are part of a broader strategy we have been building at Speedinvest over the last three years. We have built a dedicated in-house team, led by Lawrence Kilian and Werner Zahnt, and supported by Lorenzo Avon, with the sole objective of creating cash returns, whether through direct secondaries, continuation vehicles, M&A, or eventually IPOs. In today’s market, being passive is not an option. You need to create liquidity pathways deliberately, not just wait for the cycle to turn.

While all other liquidity options are typically driven by the strategic pathways of our portfolio companies, setting up tailored continuation vehicles is ultimately an entrepreneurial exercise that needs to be proactively created by the GP, which requires resources, time, and energy, all of which are often scarce at firms already struggling in a tough market environment.

It is easy to underestimate the complexity in structuring and executing these transactions. 

At times, they felt like 3D Tetris, constantly calibrating alignment across existing LPs, co-investors, new LPs, founders, and internal teams.

Further, any such exercise needs to carefully balance the tradeoff between creating immediate liquidity while keeping sufficient upside in our old vintage funds. This is why portfolio construction of these vehicles is so critical, ideally selling only parts of each asset so that each goal function is optimised. 

Was the effort worth it? Absolutely. Because with each of these deals - and you should not be surprised to see us executing more than one such deal every year - we are building up experience, network, and process depth that will become a differentiating factor down the line. 

Managing liquidity is essential to making a venture work for all parties over the long run. And, ultimately, continuation funds are more than one-off financial engineering. Making these deals happen is a different type of skillset than ‘just’ being a great early-stage investor and supporting your portfolio. It requires a different mindset, different global networks, and ultimately, again, the establishment of long-term trusted relationships. 

With a VC ecosystem in Europe that is younger, smaller in scale, and often sub-critical size, this is clearly the next hill to climb for European venture capital. But if we want to see venture in Europe grow 10x, as it must, we need to get going now. In this spirit, we will open-source a lot of the learnings, methodologies, and aha moments over the coming weeks that we gathered over the last 12 months while working on these deals, hopefully paving the way for our peers to follow.