Sriram Viswanathan, founding managing partner of Celesta Capital, shares insights on the growing importance of the secondary market for liquidity in deep tech investing. Founded in 2013, Celesta Capital focuses exclusively on deep tech, managing $1.1 billion in assets and boasting an impressive track record with 110 investments and 43 exits, including notable companies like Credo and Habana Labs. With startups staying private longer, the secondary market is becoming vital, especially in capital-intensive deep tech sectors. Viswanathan discusses how excess capital chasing fewer deals has heightened demand in the secondary market and the shift investors are making to gain exposure by purchasing stakes from early investors. He highlights the unique dynamics in deep tech, particularly in AI, where secondary investors prioritize identifying winners over immediate revenue or cash flow. While acknowledging potential market froth and valuation increases, Viswanathan stresses that the fundamentals of building meaningful, revenue-generating businesses remain crucial. Beyond AI, he sees other promising deep tech areas including biotech, hardware systems, and AI-augmented biological equipment. The prolonged period of private hold times has increased investor impatience, making secondaries a key liquidity option. Ultimately, deep tech firms must balance innovation with demonstrated revenue growth to thrive in this evolving investment landscape.
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