Australian enterprise capital has lengthy rested on a well-recognized promise – that backing a portfolio of younger startups immediately will ship returns to traders inside roughly a decade.
However the regularity of that rhythm is altering, stretching out by as much as 1.5x longer as macro shifts and dynamics reshape the trail to liquidity.
The IPO window has slowed, each in Australia and globally. The ASX welcomed solely 29 new listings in 2024, its quietest yr in twenty years, together with a rising variety of tech delistings.
With the specific lane to market largely shut, the usual 10-year fund clock is beginning to look optimistic. Globally, delayed liquidity is forcing GPs and LPs to confront inner misalignments whereby fee-driven fashions outweigh performance-based returns.
On the similar time, whereas Australia’s fundraising atmosphere is exhibiting indicators of bouncing again, the restoration is gradual and uneven. Current information exhibits Australian startups raised $812 million throughout 76 introduced rounds in Q2 2025 – a two-year low by way of deal rely, and a conspicuous absence of “mega-deals”, with solely two being greater than $50 million.
Whereas deal move varies from quarter to quarter, the general pattern we’re seeing globally is a stretching of the entire enterprise cycle. It’s prompting uncomfortable questions from LPs about when, and the way, they’ll see actual returns.
Why the cycle is increasing
Many elements may cause delayed returns, however there are two which stand out.
First, many late-stage valuations have been struck on the high of the 2021 market. Boards are reluctant to simply accept markdowns, in order that they have bridged stability sheets with convertible notes and insider extensions quite than launch new “priced” rounds.
Secondly, patrons – public traders and commerce acquirers alike – now favour clear earnings over pure development. An organization that final raised on momentum alone should show a path to revenue earlier than anybody can pay a premium. Till that occurs, exits stay on maintain and funds drift previous their authentic sundown dates.
Longer maintain durations would matter much less if the price of ready had not risen. When time period deposits pay 5%, the chance price of sitting in an illiquid development guess turns into extra apparent, and inner charge of return (IRR) maths suffers with each further quarter.
In fact, the older the fund classic, the upper the median IRR. However we’re discovering that funds from 2021 and 2022 are trailing behind different current vintages on the similar level. These days, basic companions who as soon as spoke confidently a couple of 9 yr recycle are beginning to warn that distributions may take 12 and even 15 years.
Secondaries unlock liquidity
One method to relieve the stress is a company-run secondary sale, the place a small slice of current shares is bought to recent traders in order that early backers and workers can convert a part of their paper wealth into money. Within the US, such buybacks are actually routine; Carta recorded 31 company-sponsored secondary transactions through the first half of 2023 alone.
SecondQuarter Ventures managing accomplice Ian Beatty, the secondaries fund launched in 2021
Australia could also be following go well with, with experiences noting an uptick in secondary gross sales – a wholesome improvement and signal of confidence within the startup sector.
When managed transparently, secondaries will not be solely about cashing out, however about turning into an intentional liquidity technique. It’s more and more baked into capital elevating and board planning processes, very like what we see in PE-backed corporations.
Normalising secondaries would profit each facet of the desk. Seed funds may recycle good points into the following crop of founders; workers may pay mortgages with out leaving their roles; later-stage traders would inherit cap tables filled with engaged, not stressed, shareholders.
If managed transparently, a structured buyback indicators that the corporate is powerful sufficient to assist restricted liquidity with out jeopardising longer-term upside.
Borrowing from non-public fairness playbooks
When pure exits gradual, non-public fairness managers create their very own. The traditional PE toolkit – bolt-on acquisitions, working self-discipline, and capital buildings that assist development with out dilution – is more and more seen in enterprise.
We’re seeing an increase in enterprise debt and rising curiosity from VC companies taking minority stakes in later-stage tech companies. This shift displays a broader “financialisation” of enterprise, the place investor decision-making is transferring past instinct and relationships towards structured, performance-based evaluations.
Rolling collectively a number of specialists in the identical area of interest can construct the dimensions and earnings profile that public markets or strategics now demand. Working companions borrowed from the PE world can elevate margins by tightening pricing, provide chains or customer-success metrics – worth that immediately’s exit atmosphere pays for.
Enterprise funds which as soon as prized velocity above all else are discovering {that a} little bit of operational muscle can shorten the street to liquidity extra successfully than one other advertising and marketing price range high up.
How the ecosystem can reply
Founders who used to plan for a dash now want a marathon technique. Money self-discipline sits on the centre: burn charges that after felt acceptable have develop into crimson flags, so boards are asking for month-to-month gross-margin bridges and cohort profitability, not simply user-growth charts.
Liquidity planning ought to transfer simply as far upstream. Baking a small, board-approved buyback into each main elevate reassures workers that fairness is actual cash and offers angel traders room to fund the following wave.
For GPs, candour is now one of the best forex. Providing paperwork ought to acknowledge {that a} conventional ten-year horizon is unlikely and spell out how continuation funds, recycling clauses or structured secondaries will defend returns over an extended arc.
Many LPs are themselves energetic in buyouts, in order that they respect frank discussions about liquidity engineering.
A broader goal than velocity
The aim of enterprise capital has by no means been a stopwatch. It’s to channel danger capital into concepts that may reshape industries. Borrowing strategies from PE strategies doesn’t dilute enterprise’s mission of funding transformative concepts. Relatively, it introduces better self-discipline, operational assist, and extra structured paths to liquidity, particularly in slower markets.
Australia already punches above its weight in innovation. By pairing that creativity with PE-style pragmatism, the ecosystem can maintain extra possession, and ultimately extra wealth, onshore at the same time as exit home windows lengthen.
Funds, founders and restricted companions who adapt early will flip immediately’s gradual market into tomorrow’s edge and, within the course of, rewrite the rulebook for the following decade of Australian enterprise.
Bhavik Vashi is the managing director, APAC & MENA, of Carta.
