Venture capital (VC) firms typically hold a company in their portfolio for 5 to 8 years, operating within the framework of a standard 10-year fund lifecycle. Recent market shifts and longer paths to profitability have pushed average time-to-exit higher for many VC-backed startups.
Private Equity investments are usually shorter (3-5 years). It also depends on the size of the PE firm and the timing of their fund.
Data indicates there are over 11,500 to 13,500+ private equity-backed or unsold companies within the U.S. alone, spanning sectors like consumer services (2,563+), healthcare (1,536+), industrial enterprises, and local businesses. According to HBR, private equity controls roughly 15% to 20% of the U.S. economy. “Since 2000, the private equity-backed company count climbed from about 2,000 U.S. companies to more than 11,500, a 400%+ increase. At the same time, the count of publicly-listed U.S. businesses on the NYSE or NASDAQ exchanges declined from roughly 7,000 to 4,500, shrinking the count by 35%.” [Citizens Bank] [from a prior blog post]
Private Equity Info found in an analysis of 13,757 PE exits from 2021 to mid-2026 that investment cycles have extended across the board, with a median rise of 1.1 years. Investments in tech stretched from 4.5 years in 2021 to a median of 5.8 years, per the report. [source]
“A 16-year hold period isn’t a sign of “patient capital,” it’s a signal that something’s structurally off in venture liquidity.” [LinkedIn]
Ten years in the Tampa Bay startup space provided good lessons in how investment works.
While they can call me a naysayer, no one has ever answered the BIG Question: How do the investors get their $750 million back from the TSDs? What’s the exit strategy? Even getting $100M back from one TSD or Agency seems like a stretch.
If the windows for PE exit have gotten longer, that isn’t damning to the observers who understand the PE model. It means the exit ramp moved up the highway.
Investors usually exit one of these ways:
(1) IPO, if possible like with Ingram Micro;
(2) package it up to sell upstream to a bigger investment firm; or they sell equity shares in the company to another investment vehicle (VC, PE, institutional, late-stage funds).
(3) like Joanne Fabrics or Red Lobster, extract as much capital as you can while heaping on debt that can’t be repaid and bankrupt the company. Convert all the debt to equity, take the company out of BK and run it for 2 years to sell it.
Convertible debt is an investment that an investor offers to a startup, that is repaid at a later time, generally in the form of equity. The investment can become a loan with interest and a maturity date. Later, that debt can switched to an equity stake.
The comments on the TSD space getting re-capitalized make it sound like a win. The debt is growing. The sales are growing in single digits. How do they pay the investors back?
They took more investment to grow, which means they couldn’t grow without the investment. So scale is tied to investment, but when does that investment power enough returns to pay back the investors?
For any TSD there are only 2 income streams: MDF/sponsorship funds from the vendors and the commissions.
So for Bill, Adam, Ian and the rest, What does the Liquidity event look like?
There is a lot of comparison to the insurance brokerage space. The model are similar. Investment went into that space and scaled them all up like they are trying to do with MSPs and TSDs. The offshoot to that is the proliferation of insurance comparison sites that are replacing insurance brokerages. I am certain that investors are trying to figure out how to do that. They hope to vibe code their way to it. There are only two platforms that I know of that provide some kind of TA experience: Lightyear.ai and DCITRAQ.