Q&A: Why Deep Tech Investors Are Turning To The Secondary Market For Liquidity

2026-02-02 · Source: Artificial intelligence - Crunchbase News · Field: Finance & Economics — Capital Markets & Investment Management, Deep Tech Investment · Depth: Intermediate, medium

Summary

Celesta Capital, a San Francisco-based venture firm with $1.1 billion in assets under management, focuses exclusively on deep tech, including hardware, semiconductors, and AI infrastructure. Founding managing partner Sriram Viswanathan notes that the secondary market is increasingly vital for liquidity in deep tech, especially as startups remain private longer. This trend is driven by abundant capital flowing into AI, healthcare, and data center buildout, leading to fewer high-quality deals and prompting earlier investors to seek exits via secondary transactions. While traditional secondary investors prioritize proven business models and cash flow, current AI-focused secondary buyers are making bets on potential "winners" in a "take-all" market, similar to the LLM space. Viswanathan also highlights other promising deep tech areas beyond AI, such as biotech, advanced hardware systems, and AI-powered software applications across various verticals like healthcare and financial services.

Key takeaway

For venture capital firms and deep tech founders navigating prolonged private hold periods, recognize that the secondary market offers a critical avenue for liquidity and investor distributions. Your strategy should account for the shift towards earlier exits via secondaries, driven by investor impatience for DPI. Focus on demonstrating clear revenue and margin growth, even in early-stage deep tech, to attract deeper-pocketed investors and sustain your company through potential market overbuilds.

Key insights

The secondary market is crucial for deep tech liquidity, driven by AI investment and investor impatience for earlier distributions.

Principles

• Capital abundance drives secondary market activity.
• Deep tech innovation requires infrastructure-layer focus.
• DPI is a key metric for large investors.

In practice

• Explore secondary markets for early investor liquidity.
• Focus on deep tech beyond AI, like biotech and hardware.
• Prioritize revenue and margin growth in deep tech ventures.

Topics

• Deep Tech Investing
• Secondary Markets
• Venture Capital
• AI Infrastructure
• Hardware Systems

Best for: Investor, Entrepreneur, Director of AI/ML

Related on AIssential

• Inside the booming secondaries market in Europe: 'Who isn’t selling?’ — Europe's secondaries market is booming, offering VCs liquidity amid a tough exit environment.
• 80 Seconds of Big Tech Earnings To Set Market’s Fate — Big Tech earnings hinge on AI capital expenditure translating into revenue growth amidst macroeconomic uncertainty and supply chain pressures.
• Venture Capital Is Concentrating Faster Than Ever. What Happens To Everyone Else? — Venture capital is increasingly concentrating in large rounds and top-tier companies, particularly in AI.
• 🔴 Why the three big AI companies are rushing their IPO — Three major AI companies are rushing IPOs, prompting questions about their differing urgency and market narratives.
• Vinted, ElevenLabs, Iceye: Inside Europe’s hottest secondary sales — Secondary sales are a crucial liquidity mechanism for European private tech companies and their investors.
• OpenAI’s lead is dwindling fast — OpenAI faces declining market share, investor distancing, and massive financial losses, challenging its long-term viability.

Open in AIssential →

Editorial summary, takeaway, and curation by AIssential. Original article published by Artificial intelligence - Crunchbase News.