How StepStone crushed the target for its sixth VC secondaries fund

Longstanding LP relationships and market dynamics helped the firm raise the biggest pool of capital for venture secondaries, according to partner John Avirett.

StepStone Group was able to close its latest VC secondaries fund well above target because of its relationships with LPs and its timing in the market, John Avirett, a partner in the firm’s venture and growth division, told affiliate title Venture Capital Journal.

The firm closed on $3.3 billion for StepStone VC Secondaries Fund VI, surpassing its $2.6 billion target. It is the largest VC secondaries fund raised to date, eclipsing the $1.45 billion that Industry Ventures raised for its 10th venture secondaries fund last September.

John Avirett, StepStone Group

“One of the pieces that helped us be successful is, A, really great longstanding relationships with our LPs that have been with us for awhile and have had a lot of success with us,” Avirett said. “And, B, the market dynamics where there’s very high-quality assets that are stuck privately where we have the unique ability to invest in them.”

StepStone declined to reveal the fund’s terms or name any of its LPs, however Taiwan-based Fubon Life Insurance committed $70 million, UK-based Border to Coast Pensions Partnership committed £45.7 million ($58 million; €54 million) and the Nigeria Sovereign Investment Authority and Montgomery County Public Schools Pension Fund both invested undisclosed amounts, according to Secondaries Investor data.

It is unclear how many of the LPs in Fund V returned for the new vehicle. Fund V LPs included the Community Foundation of Greater Memphis, Finland’s LUT University, the Memorial Hermann Health System, Mercy Health Foundation, New Zealand Superannuation Fund, Oklahoma Police Pension and Retirement System, Samford University, School Employees’ Retirement System of Ohio and State of Wyoming Treasury, Buyouts reported.

StepStone launched its debut secondaries vehicle in 2014 and in 2021 it acquired Greenspring Associates, a growth-stage and secondaries investor based in Maryland. Greenspring had raised more than $22 billion for growth and secondaries funds at the time of the acquisition.

Avirett, previously a general partner Greenspring, and much of his team now lead the venture secondaries strategy within Stepstone.

“We want to be the most valuable life cycle partner to both elite and emerging VC managers,” Avirett told VCJ. “When we founded Greenspring in 2000 we felt if we supported [GPs] on the fund side, built deep trust and were very additive, we would unlock opportunities to directly invest in businesses, and if and when an LP needed to sell or an entrepreneur needed to sell, we could be a first call.”

While the venture secondaries market is beginning to become more mainstream, StepStone employs a strategy it believes gives it an edge over competitors.

“We’ll do a direct secondary if we really like the business, but we can then buy more of that company by buying a fund position where that company makes up a big piece of the NAV,” Avirett explained. “We’re ultimately using tools in the toolbox to build exposures into the companies that matter, and if you do that correctly you can produce returns that look highly differentiated versus traditional secondaries.”

Fund VI is likely to follow Fund V’s approach, which was “more balanced” across LP-led, GP-led and direct secondaries deals than its predecessors.

“We’ll deploy this fund over a three-year period and what the world looks like in 2026 could be very different from what it looks like now, so we’re dynamic,” he said. “How the pie will be cut up between types of transactions we aren’t entirely sure. We view it more as a flat plane of glass. We’re in the returns-driven business and whatever is the absolute best return, we’ll put it in the fund.”

While secondary firms generally don’t reveal much about their transactions, StepStone has shared details about two deals it has done in the past six months. In February, it paid $95 million for a 30 percent stake in Primary Venture Partners’ first fund, generating liquidity for limited partners in in PVP Fund I, as VCJ previously reported.

StepStone teamed up with Industry Ventures in December to complete a secondaries transaction for Group 11 of Los Angeles. The pair paid $20 million for 12 percent of the venture firm’s second fund, which “enabled investors in Group 11’s second fund (2015 vintage) to realise their positions partially or entirely”, Group 11 said in a statement.

Hunter Somerville, a partner at StepStone Group, told VCJ in an earlier interview that he is seeing more potential buyers coming in off the sidelines.

“As people have taken their medicine and have done discretionary markdowns, things have now mostly settled to a point where it’s time to consider it,” he said. “We’ve seen a pretty significant supply pickup over last two to three quarters.”

Somerville expects deal volume to grow this year. “What we’re seeing from GPs is that they are increasingly getting questions from their LPs around how they are going to get DPI higher,” he said. “More GPs are considering whether there are solutions like this that translate a high TVPI to a higher level of DPI.”

StepStone had $157 billion in AUM across all of its strategies as of 31 March.