Venture Capital Faces Liquidity Crunch as LPs Demand Returns Amid Political Risks and Continuation Funds in Tech Funding Winter

The venture capital landscape is facing significant challenges as Limited Partners (LPs) increasingly demand liquidity, prompting venture capitalists (VCs) to utilize continuation funds as a means to extend the lifespan of their investments. This trend has emerged in response to prolonged exit timelines, exacerbated by the economic impacts of the COVID-19 pandemic and low interest rate policies. Additionally, concerns have been raised regarding the intersection of venture capital and politics, with some industry experts suggesting that political entanglements are becoming an investment risk that could hinder large-scale projects. In light of the current funding environment, secondary trading has been proposed as a potential strategy to address the liquidity crunch and provide returns to LPs, though it remains uncertain whether the market will adopt this alternative approach.