Innovator Insights: Mike Witkowski of Primary Venture Partners on the Innovation Behind Its Secondary Sale to StepStone Group

Innovator Insights uncovers the journeys and insights of today’s most influential innovators and leaders. Through authentic conversations, we look at the strategies that drive their success, the lessons learned along the way, and the broader economic forces at play.

Notes from conversation moderator Mike Breaux, Managing Director, Stifel Bank Fund Banking:

I’m excited to kick off our first Innovator Insights post featuring Mike Witkowski, CFO and Partner at Primary Venture Partners. In this discussion, we delve into the firm’s recent $98 million secondary transaction with StepStone Group, a strategic move designed to deliver liquidity to investors in today’s challenging market.

Mike offers insight into the motivations behind the sale, its structure, and how it positions Primary’s portfolio for long-term growth. But first, let’s get to know Mike a bit, including his passion for Formula One and the values he brings to his role at Primary.

Mike Breaux: Let’s kick things off with a fun question to get to know you a bit! I know you’re a big Formula One fan. What’s your favorite race you’ve attended, and which driver do you usually root for?

Mike Witkowski: Personally, I’ve been rooting for some of the more seasoned drivers like Fernando Alonso and Lewis Hamilton. They’re either in their mid-forties or pushing 40, and they’re in incredible shape, competing at the highest levels. This shift is happening in other sports too—soccer has Ronaldo, Lewandowski, and others playing into their late thirties. Their dedication to fitness, diets, and overall body care has helped them extend their prime by almost a decade. So, I’m definitely rooting for the “old guys,” so to speak.

As for races, it’s funny—if you want to really follow the race, you’re better off staying home with multiple screens. But for atmosphere, nothing beats being there live. I’ve been to three races: Austin, the Red Bull Ring in Austria, and Montreal. Austin is all about racing; Montreal offers a huge city experience with amazing food and museums, while Red Bull Ring is in the countryside near Graz, a small, historic Austrian town nearby. Each venue has its own unique vibe.

Mike Breaux: To dive into the main part of our conversation, could you give us a brief introduction about yourself and Primary Venture Partners?

Mike Witkowski: I’ve been in venture capital for close to two decades now. I started with Maveron, a consumer-only venture fund in Seattle, back in late 2008, and later became their CFO. In early 2023, I moved to New York and joined Primary Venture Partners as CFO and partner.

Primary Venture Partners is a New York City-based venture capital firm that invests in early-stage startups in sectors like B2B and SMB SaaS, Fintech, Healthcare, Infrastructure and Cyber, Frontier Tech, and Consumer.

Primary is unique among VC firms because we have what we call the Impact team, which makes up over half of our staff. This team works directly with founders and portfolio companies to help them reach their full potential. This support allows founders to focus on scaling their companies while managing limited resources.

Most of my career has been centered around VC, though I also spent time in fund administration and commercial banking. One of the biggest joys of my role is mentoring and partnering with investors, helping with deal structuring, and watching these investments take shape.

Mike Breaux: Earlier this year, you completed a significant secondary transaction with StepStone Group. Can you explain that transaction and what motivated it?

Mike Witkowski: We completed a $98 million secondary transaction with StepStone Group, in which we sold 30% of PVP Fund I to provide liquidity for our LPs.

In terms of motivations: We’re still experiencing a liquidity crunch in the VC space that’s been ongoing for over three years. While we’re seeing some activity in the IPO market and M&A, liquidity is still limited. Beyond growing the portfolio’s value, our role is to distribute that value in a timely manner so that LPs can reinvest or use the returns as they need. This transaction delivered cash distributions to our LPs while allowing Primary to retain voting rights, through a unique agreement with StepStone Group, and continue supporting our portfolio companies.

With the transaction, we aimed for three things: tax efficiency, administrative ease for both portfolio companies and LPs, and preserving our VC exemptions. Most of our investments are in qualified small business stocks, which come with certain tax exclusions when sold. In this case, we were able to retain those exclusions, which could be difficult with a structured secondaries transaction.

Mike Breaux: Can you say more about structuring this transaction to specifically help with tax efficiency?

Mike Witkowski: If we had structured this as a continuation fund, we would have lost our exempt reporting advisor status and faced more regulations. If we had considered providing liquidity through a sale of LP interests, we wouldn’t have been able to realize the tax exemption. Allowing new capital in the fund, or trying to do a series of transactions with individual portfolio companies would have created an administrative headache for all parties involved.

By setting up a wholly-owned subsidiary, we maintained all three goals—tax efficiency, administrative simplicity, and maintaining ERA exemption.

From StepStone Group’s perspective, they didn’t necessarily want to be an active investor in all 17 portfolio companies involved, so it worked out well. We retained voting rights, alleviating any potential concerns from portfolio companies about having new investors on their cap tables.

Sometimes, you just have to go against the status quo and get creative to drive optimal outcomes.

Mike Breaux: This transaction was the first of its kind, is that correct?

Mike Witkowski: That’s right. A secondaries transaction of this size for an early-stage VC lacks real-world precedent, especially with the tax-efficient structure we put in place. So we were paving the way here with a blank slate in front of us. There were a lot of moving pieces and different solutions that partially got us where I wanted to be, and what got us over the hump was getting everyone in a room to put our heads together and figure out an optimal solution. Sometimes, you just have to go against the status quo and get creative to drive optimal outcomes like this.

Mike Breaux: From the LPs’ perspective, what was their reaction?

Mike Witkowski: Our LPs were extremely pleased. Receiving that much capital back was a positive outcome for them—especially in an environment where liquidity has been, and continues to be, difficult to come by. Portfolio companies were also comfortable with the arrangement once we explained that we would retain voting rights. And finally, StepStone Group is a reputable and well-known investor, so companies were generally happy to have them involved.

Mike Breaux: Would you say this transaction was only a product of today’s exit-starved market, or do you think it might be more of a sustainable option going forward?

Mike Witkowski: I think this type of transaction will continue to be an important option for VCs. It’s another tool that allows firms to deliver liquidity to their LPs without compromising exemptions or adding undue complexity for portfolio companies. Although traditional exits will become more viable once the market stabilizes, secondary transactions like this offer a valuable alternative.

“This type of transaction will continue to be an important option for VCs. It’s another tool that allows firms to deliver liquidity to their LPs without compromising exemptions or adding undue complexity for portfolio companies.”

Mike Breaux: Turning away from this specific transaction, as CFO of a fast-growing VC firm, what are some trends you’re keeping an eye on in the industry?

Mike Witkowski: Several trends come to mind. Liquidity options, like the secondaries we discussed, are evolving, and we’re seeing new structures like debt-financed stock redemptions by portfolio companies. I think that trend will continue, and we will see more creative approaches in this space. The VC space has become more data-driven and specialized compared to when I first started. We’re also seeing larger firms moving upstream, which pushes early-stage investors like us to lean on incubations and figure out other creative ways to identify great founders and maintain low cost basis.

Mike Breaux: To wrap up, what’s next for you and Primary Venture Partners?

Mike Witkowski: From here, it’s all about continued growth and further strengthening our position as a premier VC partner for exceptional founders. We’re expanding our Impact team and looking forward to making more great investments. The VC space is continuously evolving, and I’m excited to see what the next few years hold.

Beyond the interview:

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Stifel Bank, Member FDIC