Original Title: The Art of Exit Liquidity
Original Author: Tulip King
Compiled by: Peggy, BlockBeats

Editor’s Note: Recently, Naval Ravikant—author of The Naval Bible and a well-known Silicon Valley investor—launched an investment product called USVC (U.S. Venture Capital) on social media. It mainly markets “no accredited investor qualification required, starting from $500,” and packages a basket of equity in high-growth startups, including OpenAI, Anthropic, xAI, Vercel, and more. Its narrative is clear and familiar: democratize opportunities so that ordinary investors can enter the venture capital market that originally belonged only to a few, realizing “the democratization of opportunity.”

The problem is this: when this “gateway” is truly opened, are retail investors sharing in growth—or are they taking on chips that have already been priced?

Starting from this seemingly progressive product, this article traces back a key “social contract” implicit in America’s capital markets over the past several decades—namely that the stock market is not only a financing tool, but in fact plays the role of distributing benefits. Through pension systems and index funds, ordinary workers can indirectly participate in corporate growth, thereby still sharing the fruits of capital appreciation even as inequality continues to expand.

However, as companies go public later and later and more and more value is accumulated during the private phase, this mechanism is undergoing structural change: the public market is no longer a place where value is created—it has become the endpoint where value is distributed. Index funds are no longer just tools for diversifying risk; instead, they may become passive buyers that absorb high-priced chips.

Against this backdrop, whether it is USVC or institutional designs around index weights and IPO mechanisms, their shared characteristic is not “expanding participation,” but providing holders who already own the assets with a more efficient exit route.

As the line between “getting more people to participate” and “getting more people to take over” becomes blurred, a deeper question emerges: when the way ordinary people participate in the market gradually shifts from “sharing growth” to “absorbing exits,” does this hidden contract that has long sustained stability in capital markets still hold?

The following is the original text:

Naval Ravikant (Naval) is promoting an investment product called USVC (U.S. Venture Capital). Essentially, he is doing one thing: packaging venture capital (VC), which used to be accessible only to a small number of people, into a “basket” that ordinary people can also buy. The underlying assets include top AI/tech companies such as OpenAI, Anthropic, xAI, Vercel, and others

You may have noticed that after pushing private-company valuations upward all the way to the trillion-dollar level, these VC firms are finally preparing to exit. The only question is: where do they find “exit liquidity” to take those chips?

It needs to be said that I am not accusing the venture capital circle in San Francisco of doing anything illegal. What I am accusing is that they are doing something morally highly questionable—and a practice that is eroding the promises of capitalist society.

This “transaction.”

The Baby Boomer generation is the last batch of people who truly benefited from these advantages.

The United States does not have a European-style welfare state, and from the beginning it never intended to go down that road. The “agreement” was that the stock market would take on the functions of a welfare state. Defined benefit pensions gradually gave way to defined contribution pensions; traditional pensions were replaced by 401(k) accounts; and Social Security became a “bottom line” that no one is expected to live on by itself.

The implicit premise as an alternative was: every worker would become a shareholder, and the “elevator” of capital upswings would lift workers along as well. Wages can stagnate, inequality can widen, because retirement accounts keep compounding in the background, and everyone runs on the same track—ultimately, the result is roughly “not too bad.”

It is this mechanism that keeps American inequality politically “tolerable.” As long as your 401(k) and your boss’s assets rise along the same curve, you can accept that your boss’s income is four hundred times yours. Passive index funds are the purest expression of this agreement: cashiers, teachers, and plumbers can “ride along,” relying on price discovery enabled by professional capital to capture the returns of the entire market, and then go on living their lives peacefully. In a sense, the market becomes a kind of “public resource.”

But this transaction has prerequisites: the public market must still be the place where value is truly created; the upside gains must be widely accessible; and the “marginal dollar” of new capital formation must be a dollar that index funds can hold. These conditions held for a long time, but now they no longer hold.

This is exactly what they are taking from you.

When companies grow all the way to a trillion-dollar valuation in the private phase and only then go public, the public market is no longer a place where value is created—it becomes a place where value is realized. What happens in the public market today is “distribution,” not “compound growth.” Those percentage points of returns that should have belonged to passive retirement capital during a company’s growth are now flowing to people who were already on the shareholder register before the company’s valuation reached two trillion dollars.

After Figma went public, its share price dropped by 50% within just a few weeks from its private valuation; Klarna fell by 90%. Unfortunately, this system is operating exactly “as designed.”

The industry has also noticed that this structure is excluding retail investors, so they proposed solutions—letting retail investors participate in the private market. That is their claim: democratization, open access, bridging the gap.

But what is actually being offered is, at the top of a decade-long expansion cycle in the private market, buying into positions that insiders had already built up long before these companies’ valuations were only a thousandth of what they are today. The so-called USVC (U.S. Venture Capital) is not “open access,” but a channel used to distribute assets that have already appreciated through a full round. Even Naval himself’s own wording already admits this.

Designed Exit Mechanisms

As always, the crypto industry was the first to figure out this “game.”

When some foundations find themselves holding large amounts of locked token assets, and native retail demand has dried up, with unlock nodes approaching but nobody to take the positions, this game appears. The solution is: package these locked tokens into an equity wrapper, so that regulated traditional finance (TradFi) buyers can also participate.

Tokens that retail investors would not buy directly are “packaged” into stocks—institutions can buy through compliant channels, and retail investors can also participate via brokerage accounts. The chips get distributed. Regulators (SEC) do not intervene. The foundations successfully exit. And the equity buyers obtain a position that, at bottom, was “designed” to be sold to them in the first place.

By the way, Naval Ravikant also entered the crypto industry quite early.

The venture capital ecosystem in San Francisco saw the feasibility of this mechanism and realized it could be scaled up to “the trillion-dollar level.” USVC is one door, and Nasdaq’s rule adjustments are another door.

NASDAQ is proposing: for companies just listed with a relatively low float percentage, their index weight can be calculated as five times their float percentage (capped at no more than full weight), and it will be recalculated each quarter when the index is rebalanced. For example, if a company (such as SpaceX) goes public with a 5% float percentage and a $1.75 trillion valuation, then passive funds will be forced to buy at a weight equivalent to $438 billion about 15 days after listing—almost no “observation period.”

At the same time, the lock-up period can be scheduled with precision to expire around the next index rebalancing node. At that time, the index weight will automatically rise to “full weight,” forcing passive capital to make large purchases of the stock at the moment when insiders have just become legally allowed to sell. SpaceX targets a listing in mid-June, while the next major rebalancing is in December—this “math” works.

Index funds, which should have been a tool for retail investors to counter insider dealing, have instead become the mechanism that enables insiders to complete their games. Your 401(k) is getting “orchestrated.”

The structure of these two paths is the same: insiders first accumulate positions in markets that retail cannot access; the positions mature; when natural demand in the native market is insufficient to absorb the supply at the target price, a “packaging layer” (wrapper) is designed to allow another class of funds—usually through retirement accounts or passive inflows—to participate. These funds are “insensitive to price” because they buy according to rules rather than based on judgment. Then insiders complete the exit, and new entrants take over.

All of this is “legal” because the structure itself is designed to be legal; regulators do not take action because—this “set of game rules” is already embedded within the system itself.

Consequences

To some extent, this explains why people like Sam Altman face extreme protests, why Waymo vehicles are attacked, and why data centers become targets of protests.

Those who set the fires do not need a theory of “exit liquidity.” They only need to observe their own lives: one group “arrived early,” another group “arrived late,” and the gap between them is widening at a pace far faster than any “effort, ability, or timing” narrative can explain.

A technocratic class is creating visible and ongoing evidence: ordinary capital is being “harvested” to realize the excess returns earned by those already in advantaged positions.

“K-shaped divergence” will only intensify further. What happens next will not be just a simple market correction.

Adjustments occur only within systems in which participants still believe in the rules. The burning flames are, at their core, a political issue.

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