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10 years used to enough time to deploy a fund, harvest returns, and distribute capital back to LPs.

But that was then, and this is now.

And nowadays, companies are staying private longer, and it’s forcing funds to rethink the 10-year fund lifecycle.

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Venture capital’s 10-year fund structure is under scrutiny.

Companies are staying private longer (especially the winners in the portfolio), with over 40% of them sitting in venture portfolios for nine years or more. As IPO markets remain closed and M&A activity slows, funds are leaning heavily on extensions and creative liquidity options like secondaries and continuation funds.

Why it matters:

1. The 10-year model is cracking. More than two-thirds of the U.S. venture market is tied up in unicorns, and their inability to exit is forcing VCs to request fund extensions or find alternative liquidity. LPs, who once expected cash within a decade, are adjusting to 11- or even 12-year horizons, which dilutes IRR and creates tension between GPs and LPs.

2. Liquidity is elusive for many unicorns. While headline unicorns like Stripe have seen their valuations skyrocket (from $20M to $70B), many others aren’t as fortunate. More than half of funds that receive extensions fail to return their remaining value by year 10. Even in private secondaries, shares often trade at significant discounts to their last valuation.

3. Unicorns have unprecedented leverage. Founders, who typically retain control, can choose to delay exits, especially when market conditions aren’t favorable. While this gives companies more runway, it leaves LPs with fewer immediate returns and raises questions about fund timelines.

What happens next: VCs are experimenting with new approaches to sidestep the IPO drought:

Fund extensions may become the norm as more GPs seek additional time to maximize returns. This trend could also pave the way for broader adoption of continuation funds in venture capital. However, LPs may grow more selective, prioritizing funds with proven liquidity options and faster timelines.

Read more: https://pitchbook.com/news/articles/vc-fund-extensions-lps-unicorn-ipo

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