The Role of Secondaries in Modern Venture Capital

The New Normal

Secondaries have moved from exception to infrastructure. Early investors seek returns ahead of a fund's natural end. Founders diversify personal risk. Funds use continuation vehicles to hold onto outperformers when timelines stretch beyond what LPs originally agreed to.

The motivations vary. What they share is this: someone wants liquidity before the market is ready to provide it. That creates opportunity and noise in roughly equal measure, and most of the skill lies in telling them apart.

Why Secondaries Exist

Liquidity gaps create pressure. A well-structured secondary can resolve that pressure without damaging incentives. A poorly structured one redistributes it, usually onto whoever is least positioned to absorb it.

Investors use secondaries to rebalance or make room for new capital. Founders use them to reset ownership or bring in strategic backers. Funds use them to maintain exposure to winners while returning capital to LPs.

Each motive changes the dynamics of the deal, so understanding it is the foundation of good underwriting, and skipping that step is how investors confuse activity with opportunity.

The Investor's Lens

Not every secondary signals strength. Some happen because conviction has faded and others because a fund's clock has run out, but the interesting ones happen when value creation is still ahead and the seller's patience is not. For a buyer who has done their own work on the asset, that is often the best entry the company will ever offer.

Before participating, the questions matter more than the price. Why now? Who is selling, and what does their history with this company look like? What does the structure reveal about how aligned the remaining stakeholders are?

We treat secondaries as insight into market behaviour. The reason behind the sale usually tells you more than the terms.

The Founder's Lens

For founders, a secondary can bring real relief. It can also invite scrutiny they did not anticipate.

Selling too early, or allowing early believers to exit at the wrong moment, can shift how future investors read the story. The balance between rewarding people who took early risk and protecting the integrity of future rounds is harder to strike than it sounds.

Structure is where that balance either holds or breaks. Who gets liquidity, on what terms, and whether any control transfers with it. These are the variables that determine whether a secondary stabilises a company or creates friction that outlasts the transaction.

Structure Over Optics

The best secondaries align incentives, preserve governance, and clarify the cap tableThe record of who owns what in a company, including shares, options and instruments that may convert into shares.More in glossary. The worst ones shift risk without resolving it.

Discounts, voting rights, transfer restrictions and continuation mechanics decide whether a deal supports long-term value creation or simply satisfies short-term pressure with long-term consequences.

In private markets the narrative travels faster than the structure, and bad deals get done in the gap.

Secondaries in a Deal-by-Deal Model

Because we invest deal by deal, each transaction sits within its own SPV, so a secondary in one company has no effect on any other holding and creates no fund-level pressure to sell. That does not make the positions liquid, because a secondary needs a buyer, the consents the company's documents require and a price both sides accept, and many early-stage holdings find none of those for years.

Reading the Signal

The quality of the structure, the intent behind it and the clarity of incentives determine whether a liquidity event helps or harms, and in secondaries, as in any private market transaction, conviction and timing need to point the same way. When they do, liquidity is a tool, and when they diverge it is a warning.