Venture Capital Exits to Private Equity Surge to 24% in Europe Amid Industry Convergence

Andrew Arruda, a prominent serial entrepreneur and technology investor, recently asserted that "most venture capital these days is spreadsheet private equity." This statement highlights a growing trend in the investment landscape where the distinct lines between venture capital (VC) and private equity (PE) are increasingly blurring, driven by evolving market dynamics and technological advancements. Arruda, known for co-founding AI-driven legal research company ROSS Intelligence and healthcare platform Flexpa, brings a seasoned perspective to this shift.

The traditional model of venture capital, focused on early-stage, high-risk investments with a long-term horizon towards IPOs, is undergoing a significant transformation. Venture firms are increasingly adopting strategies historically associated with private equity, such as longer holding periods, a focus on operational efficiency, and a greater emphasis on profitability over rapid, often unprofitable, growth. This convergence is partly a response to a narrowed IPO window and limited traditional exit opportunities, pushing VCs to seek alternative liquidity pathways.

A key indicator of this trend is the rise of "VC-to-PE" deals, particularly in Europe, where private equity buyouts accounted for 24% of all VC-backed company exits between 2021 and 2024. This marks a substantial increase from just 8% in the 2006-2010 period, demonstrating a clear shift in exit strategies. Venture firms are increasingly registering as Registered Investment Advisers (RIAs), granting them the flexibility to invest across various asset classes, including public market positions and secondary shares, and to engage in buyouts.

The proliferation of secondary markets also plays a crucial role, providing liquidity for founders and early investors as companies remain private for longer durations. Global venture secondary transaction volumes are projected to reach between $120 billion and $175 billion in 2025. This allows venture firms to manage portfolios more actively and generate returns without solely relying on traditional IPOs or large-scale mergers and acquisitions.

Furthermore, artificial intelligence (AI) is acting as a significant catalyst in this evolution, enabling startups to achieve capital efficiency at unprecedented levels. AI tools are being leveraged for deal origination, due diligence, and post-investment operational transformation, allowing leaner teams to scale faster. This technological integration supports the "AI-Native Venture-Private Equity" model, where firms focus on continuous value creation through AI-driven optimization, mirroring the operational intensity of traditional PE.

This strategic pivot has profound implications for founders, limited partners, and the broader market. Founders are increasingly seeking partners who offer deeper operational involvement and resources for AI-enablement, not just capital. For limited partners, the convergence means a re-evaluation of traditional portfolio construction, as the boundaries between VC, PE, and even hedge funds become less distinct, offering new avenues for diversified returns and liquidity.