Continuation Funds: The Future of VC Liquidity or Just a Moment in Time?

Early this month, we brought together experts from across the venture ecosystem to tackle one of the most pressing issues facing fund managers today: what happens when your fund reaches the end of its life, but your portfolio companies still haven’t reached an exit?

With thousands of VC funds approaching their 10+ year mark and exit timelines stretching longer than ever, this challenge is rapidly moving from theoretical to existential for many managers. That’s why we wanted to talk about continuation funds — a structure common in private equity that’s gaining traction in venture capital.

Our panelists included Katia MacNeill who is Special Counsel from Cooley, who advises VC funds on structuring and compliance; Cass Sanford from AngelList, which supports thousands of emerging managers; Helena Barman from Antler Elevate; all expertly moderated by Harriet Dedman, General Counsel at Tiny VC.

What exactly is a continuation fund?

As Katia explained, a continuation fund is typically created when a GP has a fund approaching the end of its term but still holds assets with significant upside potential. Rather than force a premature exit, the manager forms a new fund that purchases these assets, bringing in fresh capital from new investors while giving existing LPs the option to either cash out or roll their interests into the new vehicle.

This structure can involve:

• Selling an entire portfolio
• Transferring select assets (usually the winners)
• Selling a percentage of each asset (a “strip sale”) — less common

The key benefit is providing liquidity to LPs who want it, while allowing patient capital to continue backing promising companies.

When does a continuation fund make sense?

Cass Sanford from AngelList used the term “zombie unicorns” to describe the perfect candidates for continuation funds — billion dollar companies with no immediate exit plans. With over 1,200 VC-backed unicorns yet to go public, there’s no shortage of these.

“Fund managers that are holding one or more of these assets are going to be the best candidates,” Cass noted. “You can leverage those trophy assets to raise additional capital, give original LPs liquidity, continue relationships with LPs that want to continue, and bring on new LPs.”

The structure makes particular sense when:

• You’ve already demonstrated upside in the portfolio
• You’re running out of management fees to support operations
• Your LPs are seeking liquidity after multiple extensions
• You have a handful of promising assets worth carrying forward

The commercial challenges

One of the most interesting discussions centered around how managers should approach existing and new LPs with this proposition. The core challenge is straightforward: if you couldn’t get these companies to exit in 10 years, why should LPs believe you can do it in the next 5?

The key appears to be running a credible process to establish fair value. Most continuation funds involve placement agents who manage a bidding process with potential lead investors, creating price discovery that benefits both existing LPs getting liquidity and new LPs coming in.

Managing inherent conflicts

Another significant challenge with continuation funds is the inherent conflict — the GP sits on both sides of the transaction, representing both seller and buyer.

To manage this conflict, our panelists highlighted several best practices:

• Getting advisory committee consent is the bare minimum
• Running a competitive bidding process to establish fair value
• Obtaining fairness or valuation opinions from investment banks
• Maintaining transparent communication with LPs throughout
• Potentially requiring full LP consent depending on governing documents

What’s market on terms?

While traditional VC funds typically operate on “2 and 20” economics, continuation funds show some variation:

• Management fees tend to be lower (closer to 1%)
• Terms are shorter (5–7 years versus 10)
• Carry is often tiered (starting at 12–15% and increasing with performance)
• Performance hurdles are common to align interests

There’s also an expectation that GPs will roll (some or all of) their carry from the original fund into the continuation vehicle rather than taking it all as cash, maintaining alignment with the new structure.

Opportunities for standardisation

Currently, each continuation fund is custom-built, making them expensive and time-consuming. But Cass from AngelList sees an opportunity to standardise these vehicles, similar to how the SAFE revolutionised early-stage investing.

“What is the SAFE of continuation funds? What are the standard terms that we can agree on?” she asked. “Obviously, we do our fair share of side letters as well, but trying to figure out where the middle ground is what we’re really after.”

Are continuation funds here to stay?

Katia offered a thought-provoking conclusion: “These vehicles in the VC space are definitely having a moment because of the lack of liquidity. If we start seeing liquidity happening again, I don’t know that continuation funds will stay in vogue for VCs.”

This perspective makes sense — continuation funds are solving a specific problem created by extended holding periods and the IPO market freeze. If the exit environment improves significantly, their popularity may wane.

What’s next?

The scale of this challenge is staggering. AngelList alone has 2,000 funds on the platform that will reach maturity in the next five years, with over 10,000 more hitting that milestone by 2030–2031.

At unlock VC, we believe this conversation is just beginning. We’re planning to revisit this topic in 6–12 months to track how many more continuation funds have launched and how the structure is evolving.

As the venture industry matures, finding elegant solutions for fund lifecycle management will become increasingly important — not just for GPs and LPs, but for the startups that depend on stable, patient capital to reach their full potential.

At unlock VC, we’re committed to driving these conversations forward. To be part of the change, follow us on Luma to find our next events and join our 1k+ strong WhatsApp group of women in VC. Together, we’re shaping the future of venture capita