Bold Play in Venture Secondaries: StepStone Shuns Discounts for Premium Startup Stakes

Investing in startups is akin to a teetering tightrope walk trick made more perplexing by escalating discounts in venture secondaries, except if you’re investment trailblazer, StepStone Group. Perhaps this plucky firm prefer the thrill of spectacle over safety as it daringly shuns conventional venture capital wisdom in favour of a comprehensive full circle investment vision. Its playbook values premium, high-stakes assets toppling the notion of carefully priced portfolio construction.

The investment firm observed an intriguing trend in the trading of secondary assets in venture-capital funds. Those procured at discounts more than 15% returned a modest 3x return while their less discounted counterparts earned a higher 3.5x return. These new insights have been revealed in the firm’s exclusive study and shared with PitchBook. The findings illuminate StepStone’s strategy, a learned approach of paying more via a leaner discount or a considered premium for higher ranking secondary stakes.

In the face of mounting discounts on direct secondary purchases, and with time intervals between funding spells swelling, StepStone opines the declining relevance of prior valuation on the discount determination. It is a perspective backed by new evidence that the startup’s previous valuation and the discount are less pertinent, a sleight of a shift from convention. Moving on up, the firm is now focussed on heavy investments in highly valued and fast-growing startups.

As the venture secondaries market in the US hit a heady $60 billion in the first quarter, up from $50 billion in 2024, economic instability has led to larger discounts on less desirable startups. This has not deterred the new players entering the market looking for deals and, with transaction volume on the up, Avirett likens the swelling interest in venture secondaries to a ‘soup du jour’, adding a dash of culinary colour to the market landscape, with discounts driving market tourism.