Not every liquidity problem is a DPI problem. And not every DPI problem requires selling assets.
When exits take longer, it can be tempting to jump straight to the most sophisticated solution. But the better starting point is simpler:
What are you actually trying to solve?
Some funds need more time for strong assets. Some need distributions. Some need liquidity for individual LPs. Others need a cleaner route to closing an ageing fund.
Different problems call for different structures.
In our latest Academy masterclass, Kristaps Ronis, Partner at Ion Pacific, breaks down six fund-level liquidity structures and how to think about the trade-offs behind each one.
Six structures, six different jobs
Asset sale / wind-down: Sell the remaining assets, return capital and close the fund.
Continuation vehicle: Give high-conviction assets more time while allowing LPs to take liquidity or stay invested.
Strip sale: Generate interim DPI while retaining exposure to future upside.
Fund life extension: Give existing assets more time without moving them into a new vehicle.
LP tender offer: Provide liquidity to LPs who want to sell, without changing the underlying portfolio.
Fund recapitalisation: Bring new capital into the fund to support distributions while retaining the underlying assets.
The important part is what each structure does not solve.
A fund life extension creates more time, not more liquidity. An LP tender offer provides liquidity to selling LPs, but not fund-level DPI. A strip sale can generate DPI, but means giving up part of the future upside.
The principle is simple: diagnose the liquidity need first, then choose the tool.
Read more here and access the full recording and session deck in EUVC Academy.
VC Fund Liquidity Playbook
We have also brought the six structures together in the VC Fund Liquidity Playbook, mapping each option to the problem it solves, when it may make sense and what to watch out for.
Because the right structure is rarely the most sophisticated one. It is the one that solves the actual problem.
