In 2024, the VC secondary market was almost half the size of the VC primary market (i.e. VC funds deployed). If the trend holds, annual VC secondary activity will surpass primary activity within the next decade.

Is this really a surprise?

In 2024, public stock market secondary volume was 100X greater than primary volume. The last time you bought Nvidia stock, you purchased it from another investor (indirectly), not from Nvidia itself. That’s the secondary market.

As companies remain private longer, it's reasonable to assume more secondaries will occur. In the past month alone, @ Caplight's IPO Readiness Tracker flagged @ Deel conducting a $300 million secondary sale, and @ Anduril, @ Revolut, and @ Cohere doing large tenders.

How can VC ecosystem participants best prepare for this market shift?

LPs:

💧LPs will have to gauge GPs not only on their ability to find gems but also on their capacity to liquidate them at the right time.

⌛Liquidity risk will be a bigger consideration, and familiarity with continuation vehicles and LP-interest secondary transactions will be a useful skill set to develop.

GPs:

🏄🏻‍♀️The #VentureDeals (@ Brad Feld, @Jason Mendelson) approach of allocating 10% of a VC’s time to exits and admin won’t cut it. Anecdotally, we’re starting to see the rise of the Chief Liquidity Officer role among the smartest VCs.

💼 VCs will need to develop portfolio management practices akin to those of public portfolio managers.

Private companies:

🚰 Companies will have to rethink stock-based compensation management, moving from stock transfer restrictions to controlled liquidity as a tool to avoid talent leakage.

⚖️Executives will need to balance primary raises with secondary permissiveness as they manage the capital needs of their companies.

The good news? This won’t change overnight, and we’re here for you with the tools, analysis, and support you need to make the secondary market your competitive advantage.

Want real-time insights like this? Reach out at contact@caplight.com.