The Growing Role of Secondaries in Venture Capital

What are Secondary Markets?

Secondary markets in venture capital allow investors to buy and sell existing stakes in startups or VC funds, rather than waiting for a company to go public or be acquired.

Types of Secondary Markets:

• LP Secondaries: Limited partners sell their commitments or fund stakes to other investors, freeing up capital.

• Direct Secondaries: Shares in private companies are sold directly from one investor to another, often via platforms.

• GP-Led Deals: Fund managers create continuation vehicles to hold promising assets longer, while offering liquidity to investors who want to exit.

In short, secondary markets bring flexibility and liquidity to an asset class that has traditionally been highly illiquid.

Why it Matters

Venture capital has always been a long game. Traditional exits through IPOs and M&A can take a decade or more, but investors and fund managers face growing pressure for liquidity.

With IPO markets muted and M&A activity uneven, secondaries act as a critical release valve, giving LPs and GPs ways to generate liquidity without waiting for a portfolio company exit.

Sample Deals

The Investor Lens

For investors, secondaries are a unique opportunity set:

• Pricing Power: Buyers gain access at discounts to prior valuations → stronger risk-adjusted returns.

• Shorter Time Horizons: Later-stage assets mean reduced holding periods.

• Diversification: Stakes across multiple funds or companies spread exposure.

• Market Access: Opens doors to high-quality startups that may be inaccessible through primary rounds.

Key Takeaway

VC secondaries are no longer niche — they’re becoming mainstream tools for liquidity and portfolio management.

They:

• Ease pressure on LPs by offering earlier liquidity.

• Give GPs flexibility in fund lifecycle management.

• Let founders/employees access partial liquidity without IPOs.

This recirculation of capital strengthens the ecosystem by recycling funds back into new ventures, supporting innovation.

For investors, the opportunity lies in identifying high-quality assets trading at discounts and positioning early in a market that will shape the next decade of venture capital.