In February, Haveli Investments completed a majority investment in Sirion, a contract-management software maker, buying out earlier backers including Sequoia and Tiger Global. The deal is a clean template for a pattern we are seeing across private markets: a company grows into a durable, profitable business at a growth rate that no longer clears the bar its original investors need, and a buyout firm steps in to own the next chapter. The middle of a venture fund's portfolio is where these companies live — profitable or nearly profitable, growing too slowly for venture math to pencil out, and waiting for exactly the kind of ownership buyout capital provides. Buyout funds that build around this will source growth at a reasonable price.
Where the supply came from
The supply was created between 2020 and 2022, when venture investors seeded thousands of companies at venture-stage valuations on the theory that an unusually large share would reach public-market outcomes. When capital tightened, many of those companies cut operating expenses until they had a visible path to positive free cash flow, albeit with slower revenue growth. The result is a large cohort growing 10% to 20% a year, with healthy gross margins, that no longer fits the profile of a prototypical venture investment. Growth at that rate cannot return a venture fund built on power-law outcomes, no matter how well-run the underlying business is.
The venture market's 2026 recovery has not changed this, because the recovery is happening somewhere else. Financings of $100 million or more captured 87.5% of the $412.7 billion US venture investors deployed in the first half of the year. Capital is concentrating in a small number of very large rounds for companies already presumed to be category winners, which does nothing for the company growing at 15% with no realistic path to that tier. The exit side is just as narrow, with SpaceX's listing alone generating more exit value in a quarter than the prior decade, so for the company in the middle of a portfolio the drought never ended. Median IRR for North American venture funds raised since 2019 remains in single digits, and the median ratio of distributions to paid-in capital across a decade of vintages still sits below 1.0x. Limited partners now prefer a priced exit with real distributions over another year of an unmarked hold, which makes the owners of these companies motivated sellers rather than patient ones.
A trade already running
None of this asks buyout firms to invent a new kind of deal. Buyouts of venture-backed companies grew at an 18.1% annual rate between 2000 and 2019, roughly double the pace of the buyout market overall, and by 2019 nearly one in five venture-backed companies exited through a private equity buyout rather than an IPO or a strategic sale. In Europe the pattern is accelerating, with buyouts of venture-backed targets rising 18% in 2025 to reach 27% of all venture exits, the highest share this decade, including Vista Equity Partners’ €2.6 billion purchase of Index Ventures-backed Nexthink.
The plumbing has matured to match. GP-led secondary volume reached $115 billion in 2025, and continuation vehicles now span venture and growth portfolios as readily as buyout funds, giving venture GPs a way to deliver liquidity to LPs on a company-by-company basis rather than waiting for a fund-wide exit. The entry pricing works because almost nobody else is bidding. Venture investors will not write the next check for these companies, the public market is closed to their profile, strategic acquirers have grown selective, and many buyout firms still screen them out on process grounds, filtering them out at the top of the funnel simply because the deal originated in a venture data room rather than a traditional sell-side process. Thin competition and motivated sellers produce entry valuations grounded in current cash flow rather than the marks of 2021. In our own sponsor coverage this year, conversations about acquiring venture-backed companies have moved from occasional to standing agenda items.
What the underwriting requires
The underwriting is a different discipline entirely, and firms that try to run it like a later-stage venture check will misprice the deal in one direction or the other. Buyout firms underwriting companies initially intended for a venture exit focus on fundamental valuation techniques, cost synergy analysis, detailed capital investment oversight, capital structure optimization, and a well-defined bridge for future EBITDA growth. A venture investment decision, by contrast, is made on the basis of TAM, exponential revenue growth assumptions coupled with aggressive spend, and heavy reliance on a qualitative assessment of management.
That shift shows up most concretely in how the deal treats the people who built the business. The valuation a traditional buyout fund arrives at may be a down round against the company's last venture mark, which means the acquisition requires a significant realignment of management incentives: existing option pools struck at 2021 prices are often worth little or nothing at the new valuation, so the sponsor typically has to size new equity grants or a rollover structure to the deal price rather than the prior one, and do it early enough that the management team is underwriting the next five years rather than mourning the last round.
Isn't this adverse selection?
The objection is fair, and it has a direct answer. If these companies were any good, the argument runs, insiders would fund them or the public market would take them, so whatever a venture fund will sell must be damaged. But one company can support two investment cases. Venture underwrote the business at a 2021 price against the chance of an outlier outcome, and 15% growth at healthy margins fails that case however durable the company is. A buyer entering today, at a price set by current cash flow and with an operating plan sized to moderate growth, is underwriting a different case on the same asset, and the seller's willingness to transact reflects its own fund economics rather than the company's prospects. A company can simultaneously be a bad venture outcome and a good buyout, because the two frameworks are pricing entirely different things: the option value of a moonshot versus the present value of a cash-generative business. Conflating the two is the mistake, not the trade itself.
The advantage will not last indefinitely. Europe already books 27% of its venture exits as buyouts. The firms that build this capability now will pick from the best of the 2020 cohort at today's prices and carry a differentiated deployment story back to their own LPs. The ones that wait will meet this channel the way they meet every consensus trade — in an auction.
