The venture capital landscape, historically defined by long hold periods and illiquid assets, experienced a seismic shift following the tech market reset in 2022. This period, characterized by escalating interest rates, inflationary pressures, and a looming economic slowdown, brought an abrupt end to years of hyper-growth and inflated valuations. For venture capital firms (VCs) and their limited partners (LPs), the consequences were immediate and profound, creating a dire need for innovative liquidity solutions that transcended traditional mechanisms. It was against this backdrop that Turbine Finance emerged, aiming to revolutionize how venture investors access capital, bridging the gap between long-term investment horizons and immediate financial needs.

Mike Hurst, a seasoned venture partner at TTV Capital, witnessed this liquidity crunch firsthand. The market reset in 2022 saw VCs grow hesitant, dialing back capital calls and significantly slowing down new investments. This created a paradoxical situation: despite a downturn in public markets, many private companies with "excellent products and progress" found themselves struggling to secure follow-on funding, jeopardizing their growth trajectories. Concurrently, LPs, particularly institutional investors and family offices, grappled with the "denominator effect." As their public market portfolios and real estate holdings depreciated, their venture allocations, which remained largely unadjusted, inadvertently grew to represent a disproportionately higher percentage of their overall wealth than intended. This over-allocation created immense pressure for LPs to rebalance their portfolios, often at the least opportune moment.

Traditional avenues for liquidity, such as venture secondary sales, offered little solace. The market for secondary stakes became increasingly challenging, demanding significant discounts that made selling an LP position a less appealing option, especially for those investors with the financial fortitude to hold out. These discounts often wiped out years of accrued paper gains, forcing LPs to choose between urgent liquidity and preserving their investment’s intrinsic value.

Recognizing this critical market inefficiency and the systemic need for a more flexible capital solution, Mike Hurst joined forces with Peter Andes, Rob Freelen, and Kaare Wagner to co-found Turbine Finance. Their vision was to build a platform that could provide margin line-style lending to LPs and General Partners (GPs), enabling them to access capital against their illiquid venture holdings "without sourcing an endless stream of capital from outside sources." Based in Santa Monica, California, Turbine Finance’s core mission is to empower venture capital and private equity firms and their investors with early liquidity options, thereby fostering greater flexibility and resilience within the private markets ecosystem.

Turbine’s journey began with a successful seed round closure in early 2023. Demonstrating significant market validation and securing a crucial financial backbone, the firm announced a substantial $100 million warehouse credit line from Silicon Valley Bank. While its public launch was scheduled for April 2025, the firm had already been actively building its capabilities and engaging with the market. This forward momentum is evident in its early traction: to date, Turbine has underwritten approximately 60 funds, with an impressive pipeline of over 160 firms representing more than $500 billion in assets under management, according to Hurst. This rapid adoption underscores the urgent demand for Turbine’s innovative solution.

The fundamental question many LPs face, and one addressed directly by Hurst, is why they are increasingly seeking alternatives to traditional secondary sales. "First, it’s important to understand that selling an LP stake to a secondary buyer isn’t as straightforward as listing shares on a secondary market like EquityZen or NYSE," Hurst explains. The complexity stems from the nature of venture investments: as an LP, one does not directly own shares in individual private companies. Instead, an LP holds a partial ownership stake in a limited partnership that, in turn, owns stock in a diversified portfolio of 15-20 different companies. The VC firm ultimately controls the timing and method of liquidity generation, typically waiting for portfolio companies to be acquired or go public.

Even if an LP desires to sell a portion of their position, the process requires heavy involvement from the VC firm, which may even reserve the right to deny the request. Should the firm agree, it often acts as the market maker, ideally finding another existing LP as a buyer. However, such an early exit almost invariably results in a "heavy discount to today’s value." Hurst highlights the significant trade-offs involved in secondary sales: "While secondaries result in immediate liquidity, they can be extremely expensive, and the trade-offs can be significant." These trade-offs include a substantial loss of potential future upside, a potentially strained relationship with the fund manager, and a relinquishing of control over the investment’s ultimate fate. "The bottom line: if your venture position is marked at 2.0x, you may be lucky to get your principal back in a secondary sale," Hurst cautions, underscoring the prohibitive cost of this traditional exit route.

Addressing concerns about the inherent risk of lending against illiquid venture assets, Hurst emphasizes that Turbine’s debt products are "incredibly attractive relative to other credit products that banks and insurance companies are buying, such as credit card bonds and used-car debt." This confidence stems from Turbine’s rigorous underwriting process and the profile of its typical borrower. "A typical Turbine borrower is a family office with tens of millions in wealth spread across multiple asset classes," he states. Turbine’s loans are structured with "relatively low LTV (Loan-to-Value)," making them secure, yet they are "high impact" because they enable borrowers to "activate leverage in a previously illiquid arena." This strategic approach mitigates risk while providing crucial capital access.

The historical difficulty for LPs to obtain bank loans against appreciated venture fund positions lies in two primary obstacles. Firstly, the underlying investments in private companies are notoriously challenging to underwrite. Unlike public companies with transparent financials and market comparables, private company valuations are often based on internal models, less frequent fundraising rounds, and a high degree of subjectivity. Even if all necessary data were readily available, which it rarely is, banks are simply not structured to assess such assets effectively. Secondly, the venture firm itself would need to facilitate the loan and permit the LP to pledge their asset as collateral. VCs, often lean operations focused on portfolio management and fundraising, lack the bandwidth and specialized expertise to work with "dozens of commercial banks on individual loan requests." Moreover, banks are fundamentally designed to lend against "profitable, established businesses with cash flow to repay debt," making the valuation of "15 to 20 pre-profitable companies from a venture portfolio" an insurmountable task for their traditional frameworks.

Hurst succinctly articulates this disconnect: "VCs are not against LPs seeking credit backed by their positions, but they are against gigantic legal bills and heavy diligence from lenders designed to see less value in early-stage companies than they do as investors." Turbine’s innovative role is to bridge this gap. The firm partners closely with VC firms to "properly value their investments," leveraging specialized expertise to accurately assess the underlying portfolio. It then originates credit against these positions, structuring the loans to be attractive to a diverse pool of institutional buyers, including "banks, insurance companies, and asset managers that compete to house it." This intermediary function is crucial, transforming an otherwise unbankable asset into a credit-worthy instrument.

The current fundraising environment further amplifies the need for early liquidity solutions like Turbine’s. A significant trend in recent years is that "more companies are opting to stay private longer, and exit times are lengthening." Renaissance Capital data reveals that companies going public in 2025 (as projected by the source article, though likely referring to recent historical data) had a median age of 13 years, a notable increase from a median age of 10 years in 2018. Iconic companies like SpaceX, if it were to IPO in 2026, would be 24 years old – a testament to the extended timelines. This delay in exits means a slower return of capital to LPs, resulting in "fewer dollars for LPs to recycle into new funds."

In the absence of timely company exits, the market desperately requires alternative mechanisms to bridge this liquidity gap. Credit, Hurst argues, "has a clear role to play in empowering investors to recycle capital, invest in each vintage, retain their seat at the table, and ultimately realize the full upside of their investments without becoming overallocated to the asset class." This is particularly vital for VCs who aim to continue raising new funds every three years. If exit timelines remain prolonged, fund managers must equip their LPs with "tools to bridge the liquidity gap" to ensure continued participation and avoid the adverse effects of the denominator effect.

Turbine Finance represents a crucial evolution in the venture capital ecosystem, addressing a fundamental tension between long-term illiquidity and the dynamic capital needs of investors. By creating a robust and efficient market for credit-backed venture assets, Turbine is not merely offering an alternative; it is establishing a new paradigm. This approach promises to enhance capital efficiency, empower LPs to manage their portfolios more effectively, and ultimately foster a healthier, more sustainable environment for innovation by ensuring that capital can flow more freely within the private markets. As the private markets continue to mature and grow in scale, the demand for sophisticated, flexible liquidity solutions will only intensify, positioning Turbine at the forefront of this transformative shift.