Secondaries will be one of the major forces shaping the venture capital market for the next ten years, and they're already 71% of exit value in 2024. To understand this change, we spent weeks researching the origins, impacts, types, and data behind the scenes of one of venture capital's hottest topics.

In our Behind Genius Guide to Secondaries, we break down the answers in plain English to the following questions:

• Why are secondaries becoming popular now?
• What is a secondary?
• What are the four most common types of secondary transactions?
• What are a few real-world examples from Stripe, Canva, and Flipkart?
• How has secondary pricing evolved dramatically over the past year?
• What is the Secondaries Power Law?
• When do secondaries occur?
• What does it mean for the venture market today?

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Our secondaries research is ongoing, so please reach out to hello@behindgeniusventures.com, tag us on Twitter @behind_genius or Linkedin with any feedback or comments on this piece.

Why are secondaries becoming popular now? 

In writer/investor Packy McCormick’s recent piece “Everything is Technology,” he explores how venture math is changing: in the early 2000s, the top 1% of companies were worth $1B. Now, the top 1% of companies are worth more than $20B. Venture-backed outcomes are getting bigger and bigger.

Below, data from CB Insights (pulled on June 9th, 2025) covers the top 10 private companies by valuation, with SpaceX, ByteDance, and OpenAI each worth around a quarter of a trillion dollars. As just one example, ByteDance reached $155 billion in revenue in 2024, a 29% increase over the prior year. 

Private companies are now larger than ever in terms of both revenue and valuation, but they are staying private for much longer. Venture capital used to be a 5-7 year waiting game: invest early and hold on tight until an IPO or acquisition a few years later. 

What happens when startups stay private for a decade plus and investors want liquidity sooner? 

Enter secondaries. 

What is a Secondary? 

A secondary, put simply, is when an investor sells their existing company shares or fund interests to another buyer, rather than primary financing, where you are purchasing new shares.

In the world of private equity, secondary transactions have been around for decades. From William Blair’s 2025 Secondaries report (2025 is only their second year producing a report on secondaries markets), the secondary market grew 40% from 2023 to 2024, at an all time high of $156 billion. They project total growth of the overall secondaries market to hit $300 billion by 2030. 

Large institutions, like pension funds and endowments, routinely use the secondary markets to rebalance their overall portfolios, mitigate risk, manage their own liquidity needs, or exit aging fund commitments.

‍In venture capital however, contrary to private equity, we see that secondary transactions were close to 0% of all exit value until a modest spike right at 2021 and an uptick in 2023 and 2024, as shown in the graphic below:

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Leading up to 2024, we see a convergence between secondary transactions in both PE and VC, both upticking at the same time starting in around 2023.

Michael Kim of Cendana discusses this phenomena in his recent interview on Turner Novak’s podcast The Peel, where he says that historically, IPOs and acquisitions drove exits.

In the last five years however, Michael Kim says secondaries were a key value and liquidity driver.

We see this secondary growth not as a one-time trend, but a natural evolution of the venture landscape.

What are the Four Most Common Types of Secondaries? 

The four most common types of secondary in venture capital are direct, GP-led, LP-led, and tender offers.

Direct Secondaries

In a direct secondary, an investor in a company sells that company’s shares to another investor.

In this case, the asset changing hands is actual stock in a company. Oftentimes, these are one-off sales or privately negotiated deals between the selling shareholder and the purchasing investor. They allow the buyer to get into a promising company and the seller to get cash out, without the company itself being sold or going public. 

Real-World Example 

• Tiger Global’s sale of its stake in Flipkart in 2023. Flipkart, an Indian e-commerce unicorn, had been partially acquired by Walmart in 2018, but Tiger Global (an investor since 2010) still held a considerable stake. In August 2023, Tiger sold its remaining shares in Flipkart to Walmart for about $1.4 billion, valuing Flipkart around $35 billion (roughly a 7% drop from its last valuation of $37.6B)​. 

If you want a numerical deep dive, check out Max Weichel’s Medium post on evaluating complex cap tables.

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GP-Led Secondaries 

In a GP-led secondary, a GP in a venture fund sells a percentage of one investment, one investment, a percentage of the fund, or the whole fund.

The asset changing hands:

• a slice: sells certain percentage of shares in one portfolio company 
• a strip: sells a percentage of their whole portfolio. a strip sale can be used to sell a portion of a company's stake where a founder might block a sale outright.
• a fund: sells their fund, usually to a continuation fund they raise from similr LPs, so they can return capital to original investors 

Real-World Example

• In 2024, several big-name VCs executed such GP-led secondaries. NEA (New Enterprise Associates), for example, set up a vehicle backed by Goldman Sachs and others to take over its stakes in companies like Databricks and Plaid​. Insight Partners closed a $1.3B+ Continuation Fund III with HarbourVest to prolong its hold on certain investments​, and Lightspeed arranged a multi-asset secondary deal with Lexington Partners (a secondary buyer) in 2024​. These are considered structured secondaries because they involve complex agreements, new fund entities, and coordinated LP decisions as opposed to just a single trade.
• In a recent episode of This Week in Startups featuring Jason Calacanis, Alex Wilhelm, and Behind Genius Founding Partner Paige Doherty, Meghan Reynolds, Head of Capital Formation & Talent at Altimeter., gives a great breakdown.

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LP-led Secondaries 

In a LP-led secondary, an LP (limited partner) sells their stake in a venture fund to another LP.

An LP (an investor in a VC fund) sells their stake in the fund (their remaining commitments and rights to future proceeds) to another LP. The underlying portfolio doesn’t change; just who the owner of that fund stake is.

As of the June 2025 publishing of the Behind Genius Secondaries Guide, a proposed bill could raise endowment taxes from the current 1.4% to 7%, 14%, or even as high as 20%. In anticipation of this uncertainty, we expect more endowments to participate in LP secondary sales to proactively manage liquidity and reduce future tax exposure.

Real-World Example 

• Last year, Cendana Capital partnered with Kline Hill to raise a dedicated $105M fund specifically for the purpose of buying up LP stakes in seed funds. 
• Yale's endowment sale of nearly $6 billion in assets (in progress)
• Juniper Square reports secondary funds raised over $100B in 2024, with LPs selling $162B in fund stakes—a 45% increase YoY.

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Tender Offers

In a tender offer, a company allows employees to sell shares back at a set price, usually during a limited window.

They’re typically used by late-stage startups to provide liquidity (for example, letting all employees sell up to a certain percentage of their vested shares). It can be likened to company-organized “buyback” from existing holders, often coinciding with a new funding round or led by a large outside investor. 

Real-World Example

•  Australia’s design software unicorn Canva facilitated a $1+ billion tender offer so that employees and early backers could sell shares​,
• Stripe formally ran a tender offer as part of its financing at a ~$90B valuation​. 

In conclusion, here's a simple chart we made outlining these four common secondary types:

Secondary Sales Today: Less Discounts With a Trend Towards Premiums 

Secondaries are often traded at either a premium or a discount to their “Net Asset Value,” which is most heavily impacted by the supply and demand of those secondary shares. 

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A discount inherently reflects a level of perceived risk, a long time to liquidity, or any number of uncertain outcomes.

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A premium, on the other hand, may occur when a company is seen as a breakout winner, has strong metrics, retains market dominance, or exhibits a clear path to a lucrative exit. In these cases, demand to access the cap table outstrips supply of available shares, driving the price above the most recent valuation. Premiums are more commonly seen in late-stage companies with strong fundamentals and near-term exit potential, or when strategic buyers are willing to pay for access.

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According to Zanbato, median discounts for direct VC secondaries shrank from 46% in December 2023 to just 3% by year-end 2024, indicating a dramatic compression in less than 12 months.

Recent data published by Pitchbook suggests even further optimism in the premiums for secondary transactions; in Q1 2025, the average premium was 6% while the median was 3%. This is under the backdrop of the fact that both had been negative since 2022. Depression in the primary venture market had locked discounts in for over two years, but this gap has been narrowed with premiums now surpassing discounts.

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What is responsible for this trend from discounts to premiums?

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It’s difficult to say with certainty, but there may have been a higher level of transactional volume in the early-stage, which skewed the average discount/premium rate closer towards discounts. This has since shifted to later stages, which since they naturally command a premium, this naturally skews the average in the opposite direction. 

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What is the Secondaries Power Law?

As with most things in venture, the power law is very evident in the secondary market. 

In 2024, Pitchbook data (via Tomasz Tunguz) suggests that 71% exit value was in secondaries, which is more than M&A and IPOs combined.

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Kim Bent, Director of Capital Formation at Altimeter, points out that the truth behind the 71% exit value figure is nuanced, citing Pitchbook’s data that 61% of that value came from just 15 companies.

Who are these top-tier companies responsible for most of the secondary volume? 

Data from Augment, a private investing marketplace, shows the top companies with the highest market activity, and they tend to be many of the household-name unicorns that we all know about. In a similar fashion to how the “Magnificent Seven” drives returns for the S&P 500, we see a small cluster of high-performing private companies driving the majority of the value in the secondary market. 

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Additional reporting from Pitchbook further reinforces the data from Crunchbase. Pulling data from Hiive, a marketplace for pre-IPO stock, Pitchbook shows that stocks 1-5 and 6-10 comprise a lionshare (83.1%) of the market value in Q1 of 2025, with just the top five companies representing 50.6% of the trading volume. 

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When do Secondaries Occur?

The 5-Year Rule: Why QSBS Drives Secondary Timing for Early Investors

In the This Week in Startups episode on Secondary, I pointed out that the tax benefits of Internal Revenue Code Section 1202, also known as the Qualified Small Business Stock (QSBS) exclusion, which provides a way to reduce those federal income tax liabilities by offering a partial or full exclusion on the gains realized from certain small business stock. In fact, in some cases, shareholders may be able to shield 100% of their capital gains from tax. 

While the rules regarding what is excluded are quite complex, two core components are the equity position was obtained a) below $50M valuation and b) held for more than 5 years. You can read more about that here, but essentially investors will receive the first $10M in capital gain tax free as a reward for making an investment at the earliest stages. 

It’s one of the core policy items that helps incentivize early stage investors, and the timeline matters in this context. Due to QSBS, that five year mark will likely mark the beginning of a secondary discussion for early stage investors. I can imagine venture funds starting to build out in-house brokerage teams to understand the secondary market more deeply and to be able to proactively “trim” positions. 

‍For example, on "This Week in Startups”, Jason Calacanis mentioned Launch’s fund focuses on selling 10% of their position at a 50x, and 10% again at 100x, making sure they take money off the table by “trimming” their position but still leaving the majority of the position.

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What is the rationale for considering a secondary at this stage?

• Realize strong multiples early. A partial exit at a 50x can meaningfully improve fund DPI.
• Enhances the fund’s DPI: Tangible liquidity strengthens the fund’s distribution profile, which is critical for LP confidence and re-commitment. 
• Recycle capital. Freeing up capital for new deals improves IRR and capital efficiency.
• Risk-adjusted prudence: If future value creation looks increasingly capital-intensive or uncertain, locking in gains can be seen as a defensible move.
• Fund lifecycle alignment: Secondary sales can support pacing in the later years of a fund’s life, especially pre-IPO.
• Signals investment skill: Realized returns validate early-stage judgment and reinforce narrative consistency with LPs.
• Timing matters: We can see that selling at Series D in this hypothetical case made the most sense; selling earlier would’ve commanded a greater discount, and would eat into the returns in a more meaningful way.

Questions We’re Asking Ourselves

• Will the secondaries market remain concentrated to a select few companies, or will it expand to other companies outside of the top 10 as more value investors get involved earlier on? Currently, the secondary market is quite concentrated. But, if we look at the volume of dollars going into secondary funds raised by Cendana Capital or Industry Ventures, there appear to be several investors interested in buying secondary shares in companies that may be outside of the top 15 companies driving the majority of the trading volume. If we extrapolate this out to more secondary funds being raised in the next 10 years, we may see secondary markets trending toward earlier stages and across a more diverse set of companies based on growing demand. 

• Will companies with median valuations still produce venture scale returns so long as the timing is appropriate?
• Will venture lean more towards a “trader” skillset than a buy-and-hold skillset as Hunter Walk mentioned in his piece “Praise Our Lord for Secondaries…”? 
• Will there be a way for more retail investors to buy secondaries in the future aside from the traditional marketplaces that we see today?
• Will there be additional avenues for venture to become more liquid over time? 

Conclusion

Based on the data, secondaries have become a key liquidity source for investors, a structural response to today’s venture realities. In an environment now defined by longer hold times, constrained IPO windows, and LPs that have modeled out a specific liquidity profile and therefore need DPI, secondaries serve as both a release valve and a strategic tool. 

For GPs and LPs alike, the secondary market is no longer optional. It’s an increasingly common and useful tool that can alleviate the burden and mitigate the risk of overextended liquidity timelines, can materially improve DPI, and signal strong investment judgment when used with care. Secondary transactions should reflect thoughtful fund construction, conviction-weighted investing, and strategic timing, not desperation. 

In the data, we see that not all secondaries are created equal, and not every company has a secondary market: the data suggests that returns remain highly concentrated in late-stage outliers (at least for now), and selling too early in a company that is not one of the more highly-traded companies can severely undercut fund performance (as our model indicates). The key is timing, discipline, and a clear-eyed understanding of when liquidity serves the mission, and when it sabotages it.

In today’s venture environment, it is our belief that disciplined secondary participation may be one of the most important differentiators of long-term performance. Secondaries are here to stay.

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Works Cited, A Guide to Venture Capital Secondaries

1. McCormick, Packy. “Everything Is Technology.” Not Boring, 2024, www.notboring.co/p/everything-is-technology.
2. Tunguz, Tomasz. "The Great Liquidity Shift." Tom Tunguz, 2024. https://tomtunguz.com/the-exit-path-of-2024/
3. 2025 Secondary Market Report. William Blair, 2025, www.williamblair.com/Insights/2025-Secondary-Market-Report.
4. Novak, Turner. “Michael Kim Interview.” The Peel, YouTube, uploaded by Turner Novak, 2025, www.youtube.com/watch?v=_AqIrMSvya4&t.
5. “Walmart Pays $1.4 Billion to Boost Flipkart Stake.” The Wall Street Journal, 2023, www.wsj.com/business/retail/walmart-pays-1-4-billion-to-boost-flipkart-stake-8b718170.
6. Weichel, Max. “Stacking the Odds: Direct Secondaries.” Medium, 2024, medium.com/@m.weichel/stacking-the-odds-direct-secondaries-8744ac17f761.
7. “Goldman-Led Group Backs Databricks, Plaid through NEA Vehicle.” Bloomberg, 2024, www.bloomberg.com/news/articles/2024-07-15/goldman-led-group-backs-databricks-plaid-through-nea-vehicle.
8. “Insight Partners Announces Close of Continuation Fund III.” Lexington Partners, 2024, www.lexingtonpartners.com/press-releases/insight-partners-announces-close-continuation-fund-ii.
9. “Lexington Partners on GP-Led Deal Tear: Steps Up on Lightspeed Multi-Asset.” Buyouts Insider, 2024, www.buyoutsinsider.com/lexington-partners-on-gp-led-deal-tear-steps-up-on-lightspeed-multi-asset.
10. Reynolds, Meghan. This Week in Startups, YouTube, 2025, www.youtube.com/watch?v=zDHmH9qj-WM&t=31s.
11. Quinlan, Casey. “House Republicans Propose Significant Endowment Tax Hike.” Inside Higher Ed, 10 May 2025, www.insidehighered.com/news/government/politics-elections/2025/05/10/house-republicans-propose-significant-endowment-tax.
12. “Cendana and Kline Hill Raise $105M to Buy LP Stakes in Seed Funds.” TechCrunch, 11 Apr. 2024, techcrunch.com/2024/04/11/cendana-kline-hill-secondary-seed-venture-capital-funds-lps-liquidity.
13. “HarbourVest, Blackstone, Pantheon to Buy into Yale’s PE Portfolio.” Secondaries Investor, 2024, www.secondariesinvestor.com/harbourvest-blackstone-pantheon-to-buy-in-yales-pe-portfolio.
14. “Canva Nears $1 Billion Stock Sale for Employees and Investors.” The Information, 2024, www.theinformation.com/articles/canva-nears-1-billion-stock-sale-for-employees-and-investors-part-of-wave-of-private-deals?rc=guh3wu.
15. Franck, Thomas. “Stripe’s Valuation Climbs to $91.5 Billion in Secondary Stock Sale.” CNBC, 27 Feb. 2025, www.cnbc.com/2025/02/27/stripes-valuation-climbs-to-91point5-billion-in-secondary-stock-sale-.html.
16. Q1 2025 US VC Secondary Market Watch. PitchBook, 2025, pitchbook.com/news/reports/q1-2025-us-vc-secondary-market-watch.
17. Augment Marketplace. Augment, 2025, www.augment.market.
18. Qualified Small Business Stock (QSBS) Exclusion. Morgan Stanley, 2025, www.morganstanley.com/content/dam/msdotcom/atwork/qualified-small-business-stock/QSBS-Exclusion.pdf.
19. Calacanis, Jason, et al. “This Week in Startups – Secondary Markets Episode.” YouTube, 2025, www.youtube.com/watch?v=zDHmH9qj-WM&t=31s.
20. Walk, Hunter. “Praise Our Lord for Secondary Markets.” Hunter Walk, 21 Apr. 2025, hunterwalk.com/2025/04/21/praise-our-lord-for-secondary-markets-because-selling-shares-is-now-an-essential-part-of-seed-venture-capital.

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