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StepStone raised the largest fund dedicated to investing in venture secondaries ever, the firm announced<\/a> last week. This fundraise doesn\u2019t just say a lot about StepStone\u2019s venture secondaries investing prowess, but also about how LPs are thinking about the current venture market.<\/p>\n The fund, StepStone VC Secondaries Fund VI, raised $3.3 billion. This marks a big step up from the fund\u2019s predecessor, which closed on $2.6 billion, a record size at the time, in 2022. Fund VI was raised from both existing and new LPs and was oversubscribed, according to StepStone.<\/p>\n Secondaries funds like StepStone\u2019s buy existing investor equity stakes in both individual startups, known as direct secondaries, and LP stakes in venture funds. Direct secondaries allow LPs access to startup stakes in already successful companies nearing an exit, which means less risk and less time to reward.<\/p>\n This record-setting fund comes at a time when venture fundraising is down sharply. In 2023, venture funds raised $66.9 billion, according to PitchBook data. That marks a 61% decrease from 2022 when funds closed on a record-breaking $172.8 billion.<\/p>\n While the negative overall venture fundraising numbers may imply that LPs are less interested in investing in startups, Brian Borton, a VC and growth equity partner at StepStone, told TechCrunch he doesn\u2019t think that\u2019s necessarily true. He thinks LPs are still just as interested, but after the wild valuations of 2020 and 2021, many of which have evaporated now, they are looking for venture strategies that return results faster and with less risk.<\/p>\n \u201cLPs\u2019 interest level in venture capital continues to be strong,\u201d Borton said. \u201cA lot of LPs are looking for broader or more differentiated ways of building their venture exposure and I think secondaries as a method of building that exposure certainly resonated.\u201d<\/p>\n He added LPs are looking for ways to invest in venture-backed companies without as long of a holding period too. VCs, especially those that invest at the early stages, hold investments the longest of any private asset class.<\/p>\n \u201cA lot of LPs learned the lesson that you can\u2019t time the venture capital market,\u201d Borton said. \u201cThere continues to be this institutional commitment to the asset class that we haven\u2019t necessarily seen in past cycles. LPs aren\u2019t throwing in the towel, they are just being more selective in who they are backing and making sure they are doing it in the right way.\u201d<\/p>\n This fundraise also shows what LPs are thinking about the primary late-stage market too. LPs may be choosing to back a secondaries vehicle over a traditional late-stage or growth-stage focused fund because of price. Median late-stage valuations actually have risen since their initial decline when the market cooled in 2022, according to PitchBook data. Meanwhile, many secondaries deals still trade at a discount, according to data from secondaries deal tracking platform Caplight.<\/p>\n This fund close, and what it says about LP interest in late-stage startups and venture secondaries, should be good news to VCs. Many VCs are looking for liquidity in a still quiet exit market and while investors and startups want to sell stakes not every investor is allowed to buy.<\/p>\n