After SpaceX’s IPO, the new challenge for funds is no longer yield, it’s liquidity.
SpaceX’s IPO at a valuation near $1.8 trillion marks a turning point for the venture capital industry. Not because it recognizes the success of Elon Musk or validates an industrial model built over more than twenty years, but because it confronts several of the largest funds in Silicon Valley with a problem rarely encountered on this scale: how to transform tens of billions of dollars of theoretical gains into real liquidity?
The venture capital industry has historically been built around a simple promise. Fund risky businesses early on in order to generate a few exceptional exits capable of offsetting a large number of failures. SpaceX takes this logic to its extreme. The potential returns displayed by some legacy investors exceed anything the industry has seen since its inception.
Founders Fund, Peter Thiel’s fund, has reportedly invested around $600 million in SpaceX since the company’s early years. At the valuation of the IPO, its stake would now be around $50 billion, the gross multiple thus exceeds 80 times the invested capital.
To measure what such a figure represents, it should be remembered that a venture fund is generally considered to be performing well when it returns three to five times the capital provided by its investors across its entire portfolio. The best vintages in the industry sometimes reach ten times. With SpaceX, a single line could produce more value than several entire funds combined.
The case of DFJ Growth is comparable, with more than $800 million invested and a stake valued at around $35 billion, the multiple exceeds forty times the capital committed. Sequoia Capital would have invested nearly 2 billion dollars for a stake now valued at around 20 billion. Valor Equity, Elon Musk’s historic partner, could see its stake reach nearly $70 billion.
These figures illustrate the reality of the “power law” that governs venture capital. A handful of companies concentrate most of the value creation. But SpaceX reveals another reality, much less commented on: generating an exceptional return does not necessarily mean immediately cashing in this return.
In private equity and venture capital, two indicators structure the reading of performance. TVPI, or Total Value to Paid-In Capital, measures the total value created, whether realized or not. DPI, or Distributed to Paid-In Capital, measures the money actually redistributed to investors.
Today, SpaceX is blowing up the TVPIs of several funds. LPs can observe historical multiples on their reporting. But LPs don’t invest to accumulate theoretical valuations. They are waiting for distributions.
However, it is precisely at this stage that the real challenge begins, SpaceX’s historic investors do not own a few hundred million dollars of shares. They control blocks sometimes representing several percentage points of the capital of a company valued at nearly $1.8 trillion. Founders Fund would hold approximately 3% of the capital. Valor Equity nearly 4%. DFJ Growth more than 2%.
On this scale, the exit can no longer be considered as a simple market operation, the first option consists of gradually selling the shares after the expiration of the lock-up periods. This is the most classic strategy. It makes it possible to gradually monetize gains while limiting pressure on the price. But even this approach has significant constraints. Every movement of historical investors will be scrutinized by the markets. A significant reduction in participation could be interpreted as a negative signal, regardless of the seller’s actual motivations.
The paradox is all the more striking since most startups financed by venture capital suffer from a lack of liquidity. SpaceX must manage the exact opposite, the company has become so large that its main shareholders cannot exit quickly without influencing the market themselves.
A second option is to distribute shares directly to fund investors. This practice has already been used in major IPOs in Silicon Valley. The General Partners transfer the securities to the LPs, who then become direct owners of the shares. The fund improves its DPI without selling massively in the market, but this solution simply shifts the question to another category of players.
The real arbiters of the post-SpaceX era could be the sovereign wealth funds, pension plans, insurers and large university endowments which today make up the investor base of the large American funds.
These institutions generally seek exposure to rare assets, capable of generating growth over several decades. For some of them, SpaceX could appear less as a sales opportunity than as a strategic asset to keep.
A third path is also gaining importance in the industry, continuation funds. Already widely used in private equity, these vehicles make it possible to extend the holding period of an asset. Investors wishing to recover their capital are redeemed, while those wishing to retain their exposure remain invested.
The mechanism could take on an unprecedented scale with SpaceX, because one question remains at the center of all reflections: should we really sell?
Most IPOs occur when companies are approaching some form of economic maturity. SpaceX presents a different situation. Starlink continues its global expansion. Government and military contracts are moving quickly. Defense-related activities are becoming increasingly important in American budgets. Several analysts consider that the commercial space economy still remains largely underdeveloped.
In other words, historical investors are not only looking at an asset valued at $1.8 trillion. They also assess the possibility that the company will continue to create considerable value over the next decade.
The Tesla precedent necessarily influences this reflection, some of the investors who had reduced their exposure after the IPO observed with regret the multiplication of the company’s value in the following years. The experience today fuels the debates around SpaceX.
This situation also modifies the traditional balance of power between General Partners and Limited Partners. In a typical scheme, LPs wait for distributions and encourage releases. With SpaceX, some might take the opposite position. Why ask a manager to sell one of the most strategic technology assets in the world if the growth prospects remain intact?
The question goes far beyond just the SpaceX case.
OpenAI, Anthropic, Anduril or other future champions of artificial intelligence could follow a comparable trajectory. If several private companies in turn reach valuations of several hundred billion or several trillion dollars, the venture capital industry will have to learn to manage a new phenomenon: stakes large enough to rival those of the world’s largest institutional investors.
For forty years, the challenge of venture capital has been to identify future winners. SpaceX’s IPO reveals a different problem. When one of these winners becomes large enough to generate tens of billions of dollars of value for its investors, the question is no longer whether they were right to invest.
The question becomes how, when and even why they should sell.
SpaceX’s IPO could thus mark the start of a new phase for venture capital. A phase where the main challenge is no longer the creation of value, but its crystalization
