Liquidity is rising in private markets, but not all exits are equal.
Venture capital is maturing. Where liquidity once meant an IPO or an acquisition, it now includes secondaries—tenders, SPVs, continuation vehicles, and structured transfers. These transactions have become part of how the ecosystem manages long holding periods and delayed exits. But more liquidity does not always mean better outcomes.
At Paligan, we see secondaries as signals. Each one tells a story about timing, pressure, and alignment. And as always, the details matter more than the headline.
The New Normal
Secondaries have moved from exception to infrastructure.
Early investors seek returns ahead of a fund’s natural end. Founders and employees diversify personal risk. Funds use continuation vehicles to hold onto outperforming assets when timelines stretch.
The motivations vary, but they share a common thread: someone wants liquidity before the market is ready to provide it. That creates both opportunity and noise.
Why Secondaries Exist
Liquidity gaps create pressure. A well-structured secondary can solve it without damaging incentives. A poorly structured one can distort them.
Investors use secondaries to rebalance portfolios 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. Understanding those motives is the foundation of good underwriting.
The Investor’s Lens
Not every secondary signals strength. Some happen because conviction has faded or time has run out. Others happen because value creation is still ahead, but patience has worn thin.
Before participating, we ask: Why now? Who is buying, and who is selling? What does the structure say about alignment? The answers define whether the transaction is strategic or reactive. Rather than liquidity opportunities, we treat them as insight into market behavior. The why behind the sale often tells you more than the price itself.
The Founder’s Lens
For founders, secondaries can bring relief, but also scrutiny. Selling too early may reset how future investors perceive conviction. The balance between rewarding early believers and protecting future rounds is delicate.
The structure matters:
Who gets liquidity, on what terms, and how much control transfers with it. A cleanly executed secondary can stabilize ownership and restore focus. A rushed one can create friction that lasts beyond the transaction.
Structure Over Optics
The best secondaries align incentives, preserve governance, and clarify the cap table.
The worst ones simply shift risk without addressing it.
Discounts, voting rights, transfer restrictions, and continuation mechanics determine whether a deal supports long-term value or just satisfies short-term pressure.
At Paligan, we look at secondaries through the same lens as any other deal: structure first, narrative second. The question is not whether liquidity is possible, but whether it makes sense.
The Advantage of our Deal-by-Deal Model
Our structure at Paligan is naturally suited to disciplined liquidity. Because we invest on a deal-by-deal basis, each transaction is contained within its own SPV. That gives us flexibility to structure or facilitate secondary sales when they make sense, without affecting other holdings or creating fund-level pressure. Liquidity becomes a design feature, not an emergency fix. Investors retain control over timing, and alignment stays intact.
Closing
Liquidity is not a measure of success, but rather a milestone within a longer story. The quality of the structure, the intent behind it, and the clarity of incentives still determine the outcome. In venture capital as in every private market deal, conviction and timing need to align.
