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Published by Vestbee
For much of the past three decades, venture capital has meant high-risk, high-reward investing: making many early-stage bets, most of which failed, hoping a few would deliver outsized returns. While this produced some legendary companies, it also left a trail of write-offs, long timelines, and uneven distributions.
Today, Limited Partners are demanding earlier liquidity, many founders are prioritizing sustainable growth, and valuations have reset. Proactive liquidity solutions for LPs are increasingly becoming a central pillar of prudent fund management.
In this context, a different model has risen, one that we like to call Venture Growth. Unlike traditional venture capital’s moonshot bets, Venture Growth backs companies that have proven product-market fit, meaningful revenues, capital efficiency, and clear paths to scale. These are companies in need of strategic capital to accelerate growth, not to find it, offering more predictable and earlier distributions for investors.
As an example, we at Flashpoint have recently rechristened our flagship product from Venture Capital to Venture Growth, reflecting our true north: backing capital-efficient businesses with traction, proven markets, and scalable models.
As median TVPI and IRR figures continue to decline from their 2021 peaks across most vintages, the evergreen observation from Howard Marks, highlighting the limits of theoretical returns rather than actual cash, is increasingly resonating with LPs.
In the era of low interest rates, abundant fiscal and monetary stimulus, and booming public markets (most of the post-2022 gains were highly concentrated, dominated by the "magnificent 7," and the IPO market has remained weaker), investors could tolerate longer holding periods. That patience is fading.
Over 90% of US venture funds launched in 2021 made zero distributions to LPs after 3 years of launch (down from 16% for 2020 and from almost 25% for 2019 vintages), according to Carta’s data. The situation isn’t much sunnier at the 5-year mark either, with just over one-third of 2019 funds having returned any capital after five years. As for the infamous 2021 vintage, while many funds have made their first distributions in Q1 of this year, the cutoff for top decile performance remains a measly 0.04x.
Therefore, it comes as no surprise that McKinsey’s Global Private Markets Report for 2025 has found that DPI is cited as a “most critical” performance metric 2.5x more frequently than 3 years ago. Meanwhile, LPs are increasingly demanding clarity on the true health of their holdings, wanting to know how much of the TVPI on paper will actually show up as DPI once exits resume.
Venture Growth addresses these challenges by investing in companies with proven revenue and disciplined operations, allowing funds to return capital sooner while still capturing significant upside. At the same time, the data-driven nature of this type of investing also provides more predictability for both GPs and LPs.
The broader startup landscape also looks very different than it did just a few years ago. Although valuations, especially at growth stages, have corrected sharply (growth equity deal multiples are down over 60% since the 2021 peaks), innovation continues to thrive. However, nearly half of global venture funding in 2024 went to AI-native startups (a trend that shows no slowing down). Many of which have questionable gross margins, unit economics, or business models dependent on further technological improvements that are far from granted.
In this environment, chasing hype at inflated valuations is riskier than ever. Venture Growth provides an alternative:
This approach isn’t just theory. When benchmarked against funds of similar vintages, our Venture Growth funds consistently return more capital earlier. By year five, they often achieve 0.3-0.5 DPI, compared with less than 0.1x for VC peers. And while early DPI can have its downsides too (missed compounding, premature exits, limited shots at unicorns), especially for funds focused on very early stages, well-managed Venture Growth funds combine it with an outperformance on the TVPI and IRR front as well, leading to more satisfied LPs.
Venture Growth is not about abandoning ambition — it’s about pursuing it in a more disciplined, founder-aligned, and capital-efficient way. For LPs and founders alike, this approach delivers both early liquidity and long-term value.
