The IPO window has been mostly closed for five years. Acquisitions are slower. But private market investors still need liquidity. Enter secondaries.
The secondaries market — where existing private company shares are bought and sold before an IPO or acquisition — has gone from a niche corner of venture capital to one of its most active sectors.
Understanding it matters whether you're a founder, an employee with equity, an LP, or a VC.
The Basics: Primary vs. Secondary
Primary Transaction
The company issues new shares and receives capital directly. This is what happens in a typical funding round — Series A, B, C.
Money goes to: The company
Secondary Transaction
Existing shareholders sell shares they already own to a new buyer. No new shares created. The company doesn't receive the capital.
Money goes to: The seller (founder, employee, early investor, LP)
Why Secondaries Are Booming
Multiple forces have collided to make secondaries the fastest-growing segment of private markets:
The IPO drought
The public markets window has been largely closed since 2021. Companies that would normally have gone public are staying private longer — which means their employees and early investors are sitting on paper gains with no exit in sight. Secondaries are the pressure valve.
Aging LP portfolios
VC funds raised in 2015-2019 are past their expected distribution windows. LPs — endowments, pension funds, family offices — need liquidity to rebalance or deploy capital into new funds. They can't wait for IPOs that may never come.
Employee retention and equity awards
Ten years into a startup is a long time to wait for liquidity. Companies that want to retain senior employees are increasingly facilitating secondary tender offers that give employees a partial exit without requiring an IPO.
Institutional capital entering the space
Dedicated secondary funds (like those run by Lexington, Ardian, and Greenspring) have raised hundreds of billions and need deal flow. Their presence has added depth and professionalism to a market that was once scattered and opaque.
The Types of Secondary Transactions
LP Secondaries
Very commonLP sells their fund interest
An LP sells their stake in a VC fund to a third party. Common when an LP needs liquidity before the fund's natural end. The buyer gets exposure to the underlying portfolio at a negotiated discount to NAV.
Direct Secondaries
Increasingly commonShareholder sells company shares
A founder, employee, or early investor sells shares directly in a specific portfolio company. Often requires company consent and ROFR (right of first refusal) provisions.
Tender Offers
Common at late-stage companiesCompany-facilitated employee liquidity
The company organizes a structured process for employees to sell a portion of vested shares to an approved buyer. Typically tied to a late-stage fundraising round.
GP-Led Secondaries
Fastest growing categoryVC fund restructures
A VC firm transfers its best assets into a new vehicle, giving LPs the option to cash out or roll into the new fund. Allows GPs to hold winners past the fund's original timeline.
What This Means for You
Founders
Secondaries can give you personal liquidity without selling the company. In later rounds, negotiate for some secondary component. Take some chips off the table — it changes your psychology and your risk profile.
Employees
If your company offers a tender offer, understand the mechanics before you sell. Taxes matter enormously. QSBS, AMT, and timing of exercise interact in ways that can cost you significantly if not planned.
Early investors (angels / seed)
Secondaries let you recycle capital into new deals without waiting for IPOs. At the right price and at the right time, taking secondary liquidity is often the right portfolio management decision.
LPs
Secondary buyers pay a discount to NAV, which can create attractive entry points into high-quality portfolios. But diligence matters — the discount exists for a reason.
The venture capital exit model is broken. Secondaries are how the market is fixing itself.
Liquidity doesn't require an IPO anymore.
Explore fund performance data and LP tools at Value Add VC, including the VC Performance Dashboard and LP Matchmaking tool.