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In a slow exit market, venture capital firms are turning to liquidity strategies typically used in private equity. One of these is the creation of continuation funds to extend the life of investments beyond a 10-year fund term and to provide returns to limited partners.

Crunchbase News recently spoke with Mathew Eapen, partner, and Shane Goudey, partner and chair of the venture funds practice at law firm Sidley Austin. They advise private investment funds, including venture capital and private equity, on their formation and ongoing operations.

“Private equity is very well versed in secondary transactions,” Goudey said. “The venture world is getting caught up very quickly, and continuation funds is an example of that.”

Shane Goudey, partner and chair of the venture funds practice at Sidley Austin.Shane Goudey of Sidley Austin.

The No. 1 issue for venture fund managers in this market is liquidity pressure, he said.

“Venture funds are being raised every three to four years, if not quicker than that. And the fuel in the tank is distributions from the underlying fund managers, or some type of liquidity.”

That liquidity pressure has ratcheted up in recent years as venture firms have raised multibillion-dollar funds from endowments, pension plans, sovereign wealth funds, fund of funds and gatekeeper organizations with their own fiduciary asset management duties. In 2022, Andreessen Horowitz raised $9 billion across three funds while Lightspeed Venture Partners raised $6.7 billion across three funds. New Enterprise Associates raised $6.2 billion across two funds in 2023.

“Venture horizons are very long, and they’re getting longer by the day from a liquidity standpoint,” said Goudey.

A continuation fund allows a manager to maintain a longer relationship with portfolio companies they believe are still maturing.

Lightspeed and NEA, among others, are pursuing continuation fund strategies, according to a recent report from Axios. Insight Partners closed on continuation fund 3 in October 2024, a $1.5 billion fund led by HarbourVest Partners.

For smaller managers, these funds are not an option because they are so costly and labor-intensive. Smaller funds looking for liquidity tend to sell some of their portfolio to secondary buyers.

“Continuation funds started out of the great financial crisis and then became larger in private equity in 2016 through 2019, and have exploded since then,” said Eapen.

“In private equity, where you own 100% of the company, and you have 10 to 15 portfolio companies in your fund, it’s a very different analysis — because the amount of time and energy and communication with LPs is a different calculus,” he said.

“Whereas for venture, when you have hundreds of portfolio companies — they shied away from it for a while, because of the complexity, because of the costs, because this is essentially viewed as what private equity does,” said Eapen.

To set up a continuation fund, a venture firm must become a registered investment adviser. A firm creates a new vehicle, rolls certain assets into it, and finds a new buyer.

Current investors in a fund can continue to hold their interest, sell it all or sell a portion. They can also choose to make a new commitment, said Eapen.

These transactions are complex, and can be structured in lots of different ways.

“The best synergies here are when the general partner, the LPs and the new buyer all agree this is what we’re looking to do, these are the commercial drivers of it. And everyone is on the same page as to how risk is allocated, how conflicts are disclosed and how costs are being split up,” he said.

“It’s very fee intensive, but also time intensive,” Eapen said. Lots of service providers, from law firms to accountants, are involved. Firms have to engage with all LPs in a fund to get consent, review fund documents, work with a valuation expert, form a fund, find a buyer, negotiate an agreement and manage all the disbursements.

“It really is a very complicated M&A transaction,” he said.

“The secondary market is very robust now, but we are still in early days for penetration through lots of different investment strategy managers,” Eapen said. “And I think as the number of secondary buyer firms increases, as the adoption becomes more mainstream, the cost to entry will continue to be pushed down.”

Soaring Costs Expose a Trans-Atlantic Chocolate Divide

As cocoa prices surge, Europe’s chocolate habit is proving more resilient than America’s

Almost everyone loves chocolate, whether it’s a Hershey’s Kiss, a Toblerone or a dark Lindt bar.

But a historic surge in cocoa prices is testing just how deep that love really runs. And it turns out Europeans may be a bit more committed to chocolate than their American counterparts. That gap in loyalty has real implications for global confectionary companies.

This isn’t to dismiss America’s sweet tooth. The U.S. accounts for about a quarter of global chocolate sales, and many consumers have a deeply emotional connection to it—often tied to childhood memories of biting into that Snickers bar, scooping up M&M’s or unwrapping that familiar brown-and-silver Hershey’s foil.

Yet Americans and Europeans tend to satisfy their sugar cravings in different ways, and Wall Street is paying close attention. American consumers are often more impulsive, picking up a bar as a last-minute decision at the checkout line or while filling up at a gas station, notes Alexia Howard, an analyst at Bernstein. In contrast, Europeans treat chocolate more like a daily staple. Bars with higher cocoa content are often a regular item on the family grocery list in Europe, which accounts for roughly 50% of global sales.

“They’ll buy a bar and break off a few squares every day,” says Darren O’Brien, chief corporate and government affairs officer at Mondelez, which owns brands like Cadbury, Toblerone and Milka. “It tends to be a chocolate moment, rather than something you munch on in your car on your way to work.”

Since 2021, chocolate prices have risen more than 30% in both the U.S. and Europe, according to TD Cowen estimates based on Nielsen data. But the impact on demand has been more pronounced in the U.S., due to key differences in price elasticity between the two markets. While companies with a strong European presence like Mondelez have been able to pass on price increases there without sacrificing volume too much, U.S.-centric manufacturers like Hershey have found North American consumers to be more fickle.

Hershey gets about 87% of its overall net sales from the U.S. Mondelez, meanwhile, gets 60% of its chocolate sales from Europe and another 35% from developing markets. Less than 5% of its chocolate business is in North America, though it does have a wider snacking business there.

For this year, Mondelez is forecasting a 10% drop in adjusted earnings per share, which is relatively mild when compared to a mid-30% estimated decline at Hershey. Over the past two years, Hershey’s stock is down about 35%, while Mondelez has fallen roughly 5%.

Switzerland’s Lindt & Sprüngli, which caters to a wealthier consumer, has done even better—and its stock is up nearly 20% over the same period. A Lindt & Sprüngli spokesperson wrote that due to expected price increases this year “across the entire chocolate category, we would not expect to see volume progress,” while adding that “Europe is likely to perform better than North America due to higher retail share and lower price elasticity.”

Whether it is Nutella or a Kit Kat, chocolate products are relatively affordable indulgences most people in wealthy countries don’t think twice about. But lately, the cocoa market has been in crisis, driving chocolate prices up far faster than most other foods. Cocoa prices roughly tripled over the past two years, peaking above $12,000 a metric ton last year. Adverse weather in West Africa, which produces about 70% of the world’s cocoa, negatively affected production. Farmers also have faced crop disease, including swollen shoot virus.

At first, manufacturers were able to hold off on sharp price hikes thanks to hedging strategies and the hope that the spike would be short-lived, explains Martijn Bron, a former head of cocoa trading at commodity giant Cargill. But as high prices have persisted, those companies have been forced to pass on steep price increases—testing just how much consumers are willing to pay. Suddenly, how serious people are about chocolate has become a billion-dollar question on Wall Street.

Besides raising prices, manufacturers are increasingly trying to keep consumers happy with less. That includes developing “innovative” products—reformulated sweets that contain less actual cocoa content—or simply making smaller versions of the same product, a practice known as “shrinkflation” because it effectively increases the cost per unit.

Mondelez’s edge over Hershey extends beyond cultural preferences. For starters, President Trump’s tariffs—while meant to favor U.S. manufacturers—are hurting American producers more. Hershey executives have warned that the unmitigated impact of tariffs could be as high as $100 million per quarter in the third and fourth quarters of this year. They have said the company is working to secure an exemption for cocoa—an ingredient that can’t be produced at scale domestically.

Ironically, companies such as Barry Callebaut, Mondelez and Ferrero, which have large factories in Canada and Mexico serving the U.S., are at a competitive advantage, points out Raphaël Felenbok, an industry expert. They are effectively able to dodge U.S. import tariffs by importing the cocoa to neighboring countries and then selling the finished product under the tariff-free U.S.-Mexico-Canada Agreement, he explains. Meanwhile companies like Hershey, Mars Wrigley and Lindt & Sprüngli, which have significant U.S.-based production, are more exposed to cocoa tariffs.

Another downside of focusing on the U.S., Bernstein’s Howard points out, is the significant discrepancy in GLP-1 penetration. The weight-loss and diabetes drugs have taken off in the U.S. and are known to suppress cravings for snacks and sweets. Howard is among analysts speculating that the drugs might already be affecting sales of all sorts of snacks in North America.

Love of chocolate will endure on both sides of the Atlantic. It is just a little more unconditional in Europe.

Competition from groups including China’s DeepSeek suggest big AI models will be ‘commoditised’, warns Mary Meeker

US groups such as OpenAI which are racing to develop artificial intelligence are at risk of being undercut by cheaper rivals such as China’s DeepSeek, according to star investor and analyst Mary Meeker whose presentations on tech trends are followed across Silicon Valley.

Meeker, an early backer of companies including Meta, Spotify and Airbnb, told the Financial Times that new AI advances will mint “multiple companies worth $10tn and they probably will not all be based in North America”.

She added “the wealth creation will be extraordinary. We have never had a five billion-user market that one could get to so easily.”

Her latest report on industry developments highlights the growing challenges for US groups that have taken an early lead in developing large language models (LLMs).

Meeker argues that the costs to train models such as OpenAI’s GPT series or Google’s Gemini is rising, while increasing competition from cheaper domestic models and overseas groups such as DeepSeek is putting pressure on pricing power.

“The business model is in flux. And there are new questions about the one-size-fits-all LLM approach, with smaller, cheaper models trained for custom-use cases now emerging,” according to the report. “In the short term, it’s hard to ignore that the economics of general-purpose LLMs look like commodity businesses with venture-scale burn.”

Meeker was dubbed “the queen of the internet” as a result of her analysis while working at Morgan Stanley, which anticipated the success of Google, Apple and others. She joined venture capital firm Kleiner Perkins in 2010, before co-founding her own investment firm, Bond, in 2019.

Her firm’s latest presentation illustrates how explosively the market for generative AI tools has taken off since the launch of OpenAI’s ChatGPT chatbot in late 2022.

The tool has raced to more than 500 million monthly users in two years, spurring venture capital bets on a panoply of rivals.

Investment into data centres and other AI infrastructure has also accelerated. Capital expenditure from the six largest technology companies in the US jumped more than 60 per cent year over year to more than $200bn in 2024.

That has given the three leading US start-ups in the LLM race — OpenAI, xAI and Anthropic — a combined valuation of around $400bn and boosted the revenues and share prices of Big Tech companies such as Nvidia, Meta and Microsoft.

Meeker’s analysis shows that LLM companies also face growing threats: massive upgrades to chips and algorithms have slashed the costs of running models, opening the door for rivals including China’s DeepSeek to launch cheaper and more efficient models.

Training the most advanced models remains a prohibitively expensive task. Estimated costs to develop cutting-edge models have increased by 2,400-times in eight years, pricing out all but a handful of competitors which lack a clear path to profitability.

OpenAI, Anthropic and xAI have raced to a collective annualised revenue of around $12bn. But they raised a combined $95bn to do so. OpenAI’s valuation-to-revenue multiple “looks expensive”, according to Meeker.

Price wars and a proliferation of cheaper models are good news for consumers, but mean start-ups aiming to take full commercial advantage of their technology will need deep pockets and patient financiers.

Meeker compared their challenge to Uber, Amazon and Tesla, each of which burnt through cash in order to establish a large business they could ultimately monetise.

“The rules that hold well in these times of euphoria are only invest what you’re willing to lose, and take a portfolio approach,” said Meeker. “Putting all your eggs in one basket is a risk here, because everything is up and to the right — until it isn’t.”

A visualization of how far the U.S. has fallen behind

Décidé à sortir des télécoms, le fondateur d’Altice se construit une nouvelle vie entre Israël, les Émirats et l’Arabie saoudite. À 61 ans, le milliardaire franco-israélien, toujours dans le Top-20 des grandes fortunes françaises, se projette entre médias, philanthropie, et diplomatie économique.

La nouvelle vie du fondateur d’Altice est ailleurs depuis qu’il a décidé de se retirer des télécoms. La cession de l’opérateur SFR est enclenchée, après que l’homme d’affaires est parvenu à renégocier sa dette colossale, en février dernier. Les négociations vont certainement prendre plusieurs mois, mais déjà, Patrick Drahi se projette sur de nouveaux terrains. A ses proches, il se plaît à répéter que les grandes décisions stratégiques dans une vie doivent se prendre entre 50 et 70 ans. A 61 ans, devenu grand-père, cet éternel globe-trotter a déplacé son propre centre de gravité. « Vous avez plus de chances de croiser Patrick à Tel-Aviv ou Abu Dhabi qu’à Paris ou Londres », résume une connaissance.

Toujours dans le Top-20 des grandes fortunes

L’homme d’affaires a quitté les hauteurs de Zermatt, en Suisse, où le fisc, avec lequel il ferraille depuis 2019, lui réclamerait la somme record de 7,5 milliards d’euros. Il est aussi moins présent aux Etats-Unis où il tente, depuis l’an dernier, de céder Altice USA. Patrick Drahi passe désormais l’essentiel de son temps en Israël, dont il est ressortissant, et où il se partage entre les affaires, avec l’opérateur Hot, l’univers des médias avec la chaîne 24News et ses activités philanthropiques.

Dans le dernier classement de Challenges des grandes fortunes françaises, l’homme d’affaires franco-israélien pointe toujours dans le Top-20 avec environ 7 milliards d’euros.

Très présent aussi dans les pays du Golfe

Patrick Drahi se rend aussi fréquemment dans les pays du Golfe, où il se montre très engagé dans l’application des accords d’Abraham entre Israël et les Emirats. L’émir Mohammed ben Zayed al-Nahyane, président des Emirats arabes unis, est un ami. Preuve de cette bonne entente, le fonds d’investissement Abu Dhabi Developmental Holding Company (ADQ) a investi 1 milliard d’euros dans Sotheby’s, propriété du milliardaire, pour aider la prestigieuse maison à se désendetter. La célèbre société de vente aux enchères new-yorkaise, qu’il a rachetée en 2019, reste l’un de ses dadas.

L’homme d’affaires possède aussi ses entrées en Arabie saoudite, auprès du prince héritier Mohammed ben Salmane. « Il est persuadé que l’économie peut aider à construire la paix au Proche et au Moyen-Orient », confie un proche. Entre Tel Aviv, Riyad et Abu Dhabi, Patrick Drahi dessine patiemment les plans de ses nouveaux business.