Continuation Funds: The New Exit Nobody Talks About

The secondaries market hit $150B in 2024. Roughly $65-70B of that was GP-led — and continuation funds were the engine driving it.

This is not a niche institutional maneuver anymore. It is becoming a primary exit mechanism for the best-performing venture-backed companies — and most founders, LPs, and even newer investors do not fully understand how they work or who benefits.

How Continuation Funds Actually Work

Standard VC funds have a 10-year life — roughly 3-4 years deploying capital, 5-6 years managing and exiting. When that clock runs out and the best companies still aren't public or sold, GPs face an ugly choice: force an exit at a bad price, or ask LPs for yet another extension.

Continuation funds offer a third path. The GP creates a new vehicle — sometimes a single-asset fund, sometimes a portfolio of 2-5 companies — and transfers the target assets at an independently assessed NAV. Existing LPs get a binary choice:

The GP then raises new capital from secondaries buyers — firms like Lexington Partners, Ardian, Hamilton Lane, or Goldman Sachs Asset Management — to fund the liquidity option for LPs who want out. The GP continues managing the asset with a fresh 3-5 year horizon.

The Numbers Behind the Trend

The Real Conflict of Interest

Here is the uncomfortable truth GPs rarely advertise: in a continuation fund, the GP sits on both sides of the transaction. They represent the fund selling the asset and they manage the vehicle buying it. They set — or heavily influence — the transfer price for a company they have been running for years.

Best practices include independent fairness opinions from firms like Duff & Phelps or Houlihan Lokey, and LP advisory committee approval. But in practice, LPs often lack the information and leverage to push back meaningfully. If you are a $20M pension fund in a $400M GP's fund, your "no" vote does not carry much weight.

The incentive misalignment cuts both ways: GPs might price the transfer too high (favoring existing LPs on paper but making it hard to generate returns in the new vehicle) or too low (giving incoming buyers a steal while existing LPs miss appreciation they were owed). There is no clean answer — only disclosure and governance quality.

Who Uses Them and Who Benefits

What This Means for Founders

If you are a founder and your lead investor moves your company into a continuation vehicle, pay attention to the details:

• 1.Your cap table now includes secondaries buyers with different return targets and timelines than your original VC — typically 2-3x in 3-5 years, not 10x in 10 years.
• 2.Secondaries buyers usually don't take board seats or provide operational support. They are financial holders. Your relationship with the original GP may stay intact, but their ownership economics have changed.
• 3.Continuation fund buyers often pressure for a faster, cleaner exit path. If you were planning a 7-year journey, expect a conversation about the exit strategy within 18-24 months of the transfer.
• 4.The transfer price sets an informal benchmark for your next round. If the continuation fund bought in at $2B, your Series E will face a higher bar.