In a surprising shift in the venture capital landscape, seed investors are increasingly opting to sell their stakes in winning startups much earlier than traditional timelines suggest. According to a recent report by TechCrunch, this trend, dubbed the new math, is driven by a combination of market dynamics and the need for quicker returns. Charles Hudson of Precursor Ventures, who recently closed a $66 million fund, highlighted this strategy during a discussion with limited partners.
The rationale behind this move is rooted in the evolving risk-reward calculus of early-stage investments. With market uncertainty and longer paths to IPOs or acquisitions, seed investors are seizing opportunities to lock in gains by selling to later-stage funds or secondary markets. This allows them to recycle capital into new opportunities while mitigating risks associated with prolonged holding periods.
Hudson noted that the decision to sell early often hinges on a startup’s ability to demonstrate rapid growth and attract interest from larger investors. Startups showing strong metrics in user acquisition or revenue within 12-18 months post-seed are prime candidates for such exits. This approach contrasts sharply with the traditional model of holding investments for 5-7 years.
Moreover, the rise of secondary markets has facilitated this trend, providing liquidity options that were previously unavailable to early-stage investors. Platforms enabling partial or full stake sales have become a game-changer, allowing investors to capitalize on high valuations without waiting for a full exit event like an IPO.
However, this strategy is not without risks. Selling too early may mean missing out on exponential gains if a startup becomes a unicorn or achieves a blockbuster exit. Investors must weigh the immediate benefits of liquidity against the potential for outsized returns in the long term, a balancing act that Hudson describes as both art and science.
As this trend gains traction in 2025, it could reshape the venture capital ecosystem, influencing how seed funds structure deals and evaluate opportunities. For founders, it signals a need to deliver results faster, as early investor exits could impact future fundraising dynamics. The new math is here, and it’s rewriting the rules of early-stage investing.
Alfred Lee
