Exits & Liquidity
Last updated
Quick Answer
A secondary transaction where a GP sells a portfolio of multiple fund assets together as a package to a secondary buyer, rather than selling individual company positions.
A Strip Sale is a type of GP-led secondary transaction where the general partner sells a portfolio of multiple assets from the fund as a bundled package to one or more secondary buyers. Unlike a continuation vehicle (which typically focuses on 1-3 high-conviction assets), a strip sale involves selling a broader cross-section of the portfolio—often 5-15 companies—as a single transaction. The 'strip' refers to a slice across the portfolio rather than cherry-picking individual positions. Strip sales are typically used when a fund is nearing or past its term and needs to liquidate remaining positions efficiently, when the portfolio has several small positions that are not individually attractive to secondary buyers but valuable in aggregate, or when the GP wants a clean wind-down rather than managing a continuation vehicle. Pricing in strip sales reflects a portfolio discount—the buyer assumes concentration risk and illiquidity but receives diversification across multiple positions. Discounts typically range from 10-40% of NAV depending on portfolio quality and market conditions.
In Practice
A 2013 vintage fund has 8 remaining portfolio companies as it approaches final wind-down. Rather than negotiating individual sales for each position, the GP conducts a strip sale of all 8 companies at a combined valuation of $120 million (a 25% discount to the $160 million aggregate NAV). A secondary fund acquires the entire strip, providing immediate liquidity to LPs. The GP receives a small transaction fee, and LPs receive $120 million in distributions, allowing the fund to formally wind down.
Why It Matters
Strip sales provide an efficient exit mechanism for mature funds with diversified tail portfolios. For LPs, strip sales deliver liquidity faster than waiting for individual company exits. For secondary buyers, strips offer diversification. The trade-off is the portfolio discount—LPs must weigh certain but discounted liquidity against the possibility of higher but uncertain returns from holding individual positions to exit.
VC Beast Take
Strip sales are becoming the preferred exit strategy for GPs sitting on older, illiquid positions that LPs are tired of waiting for. It's essentially admitting that portfolio construction didn't work as planned — instead of a few big winners carrying the fund, you're packaging the 'living dead' companies together and hoping someone else can unlock value. Secondary buyers are getting smarter about cherry-picking assets, so GPs increasingly have to sell the good with the bad to get deals done.
A Strip Sale is a type of GP-led secondary transaction where the general partner sells a portfolio of multiple assets from the fund as a bundled package to one or more secondary buyers.
Understanding Strip Sale is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Strip Sale falls under the exits category in venture capital. This area covers concepts related to how investors and founders realize returns on their investments.
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