Charles Hudson had just shut down his fifth fund a few months ago. This is when one of the limited partners asks him to do the exercise. I wondered if Hudson sold all the portfolio companies in Series A. How about Series B? Or Series C?
The questions were not academic. Twenty years in venture capital, Hudson is permanently looking at the mathematics of seed investment changes. LPS, who previously had a hold period of 7-8 years, suddenly asked about interim fluidity.
“Seven or eight years feels like a really long time,” says Hudson.
Why: The steady flow of venture returns in recent years – returns that allow long hold periods to be accepted – have largely been exhausted. Many supporters of very early stage VCs, coupled with the availability of more other liquid investment options, are calling for a new approach.
The analysis he requested by his LP revealed an unpleasant truth, Hudson says. Not everything was sold on Series A Stage. The compounding effect of staying at the best companies outweighed profits from reducing losses early. However, Series B was different.
“If you sell everything in B, you can have a 3X North fund,” Hudson discovered. “And I’m like, ‘Well, that’s pretty good.’ ”
Beyond pretty good things, that realization reshaping what Hudson thinks about portfolio management in 2025. Currently a veteran investor – Hudson spent 22 years at VC among the precursors, eight years at UNCORK Capital and four years at IN-Q-TEL early in his career. Their career.
It’s not an easy mental change to make. “The companies I have the most secondary interest are also the set of companies I have the most anticipated for the future,” says Hudson.
It’s not just Hudson. His thinking about secondary sales reflects wider pressures to rebuild the venture ecosystem. Hans Swildens, the founder of Industry Ventures, a San Francisco-based fund and direct investment company that invests in 700 venture companies, told TechCrunch in April that the venture fund is “starting to rescue what is needed to create liquidity.”
In fact, Swildens sees venture funds hiring full-time staff members, particularly in pursuit of alternative liquidity options. Some seed managers said, “We’ve dedicated several months from our funds to liquidity manufacturing.
This change of priorities goes far beyond a single fund, but the pressure from small funds like the traditional seed stage funds who are proud to support unconventional founders like Bobby Baby Formula’s Laura Modi (a solo founder of the control industry with no previous experience) and Dr. Rad A’s Doctor Gar is particularly sharp. Companies with megafunds like Sequoia and General Catalyst can afford to wait for a $25 billion outcome, but less funds need to be more tactical about when and how they are harvested.
Perhaps nowhere is there any visible shifts as much as Hudson’s relationship with limited partners. The university’s fund, once the most coveted LPS of the venture, is now tackling unexpected challenges from the Trump administration.
Of course, Harvard is the poster child here, and is undergoing continued scrutiny of its substantial contributions amid the federal investigation into admissions practices, threats to research funds related to compliance issues, and the university’s calls for increasing annual spending requirements or facial taxes.
Based on their conversations with LPS within these organizations, Hudson says they have never believed in the power of ventures more, but have never been more hesitant to make a 10-15 year illiquidity commitment.
The result is a more complex LP base with competing needs. “In the long run, even if it’s a suboptimal outcome, some people hope to have the money back as quickly as possible,” says Hudson. Others say that Hudson “likes keeping everything mature. [their] Returns. ”
Navigating these demands requires a sophisticated variety of portfolio management that seed investors traditionally did not need. Ventures are beginning to feel much less, like art and things like “feeling like some of these other sub-subsiset classes in finance,” he says.
Hudson is not without hope, he adds, but he has a clear eye for what is changing on the ground and the opportunities that those changes will create.
As the funds grow and more capital is deployed, they are inevitably becoming more algorithmic, and “these academic backgrounds have been where companies in these categories, the founders of these schools, worked in these companies,” he says.
This approach works to efficiently deploy large quantities of capital, but misses the “strange and great” company that defined Hudson’s best returns and maintained its precursors in the game.
“If you’re going to hire someone right next to your resume screener tool,” he says.
You can hear a full interview with Hudson via TechCrunch’s StrictlyVC download podcast. A new episode comes out every Tuesday.
Corrected: This story originally listed Byheart as a precursor portfolio company. The organic baby formula manufacturer that has been backed by this is Bobby.
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