When Good Investments outlive their Funds

India’s venture capital story is usually told from the perspective of the entrepreneur. A founder starts a company, raises capital, builds a business and eventually reaches an exit. But sitting quietly behind that journey is another clock - the clock of the fund that originally invested in the company.

That clock matters because venture funds are not perpetual pools of capital. They have defined lifecycles and, eventually, capital has to be returned to LPs. The challenge is that companies don't necessarily follow the fund's timeline. A company can be growing rapidly, creating significant value and still have many years of opportunity ahead, while the fund that backed it is approaching the end of its life.

This creates an interesting situation: a good company, a good investment and an ageing fund can still create a liquidity problem.

India is entering this phase

This is becoming increasingly relevant in Indian private markets. A number of Indian VC and growth funds from the 2015–16 vintage are now roughly 10–11 years old, while the 2017 cohort is beginning to approach the same window. These are not necessarily expired funds - actual tenure depends on the fund documents and extensions but they represent an increasingly relevant cohort for thinking about portfolio liquidity.

There is also a regulatory signal. SEBI’s 2026 settlement process covered legacy VCF schemes in connection with expired liquidation periods and unliquidated investments. The important point is that an ageing fund does not necessarily mean an ageing or distressed asset. In fact, some of the best investments in a fund may be the ones still sitting on the balance sheet because they have continued to compound.

When two clocks don't match

Imagine a VC fund that invested in a company eight or ten years ago. The company is doing well, but an IPO or strategic exit may still be several years away. The fund, however, is nearing the end of its lifecycle.

The fund manager now has a difficult choice: seek an extension, wait for an exit, explore a continuation structure, or find another investor willing to acquire the position.

This is where secondaries can be powerful. They allow the investment's timeline to be separated from the original fund's timeline.

Think of it as a relay race. The company is running a much longer race, but the original fund has reached the end of the leg it committed to run. There is no reason for the company to stop simply because that investor has finished its leg. A secondary transaction allows the fund to hand the baton to an investor willing to run the next one.

The result can be a genuine win-win-win: the existing fund gets liquidity and can return capital to its LPs; the company gets an investor that can support it without forcing a premature exit; and the new investor gets the opportunity to own a more mature business with significantly more information than was available at the original investment.

India spent the last decade building an impressive venture capital ecosystem. Institutional capital came into the country at scale, thousands of companies were funded and a generation of businesses was built with significantly longer-term private capital behind them.

The first generation of institutional venture investments is moving through its next stage. Some companies have exited. Some have failed. Some have become enduring businesses. And some remain private despite having created substantial value. As this happens, the market needs more than capital formation. It needs capital mobility - the ability for ownership to move from an investor whose circumstances or fund structure have changed to an investor who can remain invested for longer.

Why do we care about this?

Malpani Ventures is structured differently from a traditional multi-LP venture fund. We are a single-LP family office with patient capital. That gives us the ability to look at an investment based on the underlying business rather than being constrained by a predetermined fund-return timeline. If we believe a company has five, seven or ten more years of value creation ahead, we can underwrite that opportunity without needing to manufacture an exit simply because a fund is approaching the end of its life.

We like to think of Malpani Ventures as Micro-PE. While our roots are in venture investing, our mindset is that of an owner. We look to invest in businesses where we can take a long-term ownership perspective rather than simply underwrite the next funding round or the next exit.

Over the past several years of investing, one of our learnings has been that too many investors and, more importantly, too many investors with mismatched time horizons can sometimes kill a good business faster than competition ever could. Founders shouldn't have to optimise their business around the exit timelines of investors on their cap table.

We are therefore always looking out for businesses where a change in ownership can bring greater alignment and genuinely patient capital. We like stepping into these situations but only when the underlying business fits firmly within our broader investment thesis.

Read our complete thesis here: https://www.malpaniventures.com/thesis

The opportunity isn't distress. It's alignment.

This distinction matters to us. We are not looking for distressed sellers simply because a fund is old. Some of the 2015–16 vintage funds have already returned significant capital while retaining unrealised investments. These are not necessarily broken assets. They are assets where the ownership timeline may no longer match the business timeline.

A good VC fund should not have to wait indefinitely for a company to mature simply because it still believes in the asset. That is where we believe a patient, long-term owner can play a useful role. The secondary market is often described as a market for liquidity. We think there is another way to look at it.

Sometimes, the investment hasn't reached the end of its journey. The fund has simply reached the end of its. That may be where the next opportunity begins. For the fund, that can mean liquidity. For the founder, continuity and for us, an opportunity to become the long-term owner of a business we believe in.

That is the kind of Micro-PE opportunity we are looking for

If you are a fund or investor exploring liquidity for a high-quality portfolio company or a business looking to give your investors a respectful exit, we’d love to hear from you at team@malpaniventures.com