Why Secondaries Are the New IPO — and What Founders Get Wrong About Them
Published: June 2026 · Desert Gate Capital Research Desk · Dubai, UAE
8-minute read · Secondaries · Founder Liquidity · Venture Capital
A founder we know turned down a $40 million acquisition offer last year. Not because the number was wrong — it was fair. She turned it down because she believed the company was worth three times that in 36 months. Her investors agreed. The problem was her mortgage, her co-founder’s burnout, and three early employees who had been staring at paper wealth for seven years.
Six weeks later, she sold 8% of her vested holdings through a structured secondary transaction. No press release. No valuation reset. No signal to the market that anything had changed. She kept building. Her employees got real money. Her Series B investors barely noticed. This is the exit that venture capital doesn’t talk about — and it is now bigger than the IPO market.
The Data Reality
The numbers are no longer subtle. US venture secondary transaction value reached $106.3 billion in 2025, according to PitchBook’s Annual US VC Secondary Market Watch — an 83% increase from the prior year. By Q1 2026, annualised direct secondary volume had climbed to $112 billion. That figure puts secondaries squarely in the same league as IPOs and M&A as a liquidity channel for venture-backed companies.
Meanwhile, the IPO window remains largely shut. Fewer venture-backed companies went public in the four years from 2022 to 2025 combined than in 2021 alone. In 2025, venture-backed companies were 16 times more likely to be acquired than to IPO by deal count, according to PitchBook-NVCA data. The median time from founding to exit has stretched to 10–12 years — roughly double the historical norm. For founders, this means a decade or more of illiquid equity before any traditional exit materialises.
The GP-led continuation vehicle market tells an equally dramatic story. GP-led transaction volume grew from $15 billion in 2021 to $116 billion in 2025, with continuation vehicles accounting for 43% of total secondary market volume. Dechert’s 2026 Global Private Equity Outlook found that 46% of PE managers are now using GP-led secondaries or continuation vehicles to facilitate LP distributions — nearly double last year’s figure. The average continuation vehicle transaction size increased over 15% year-over-year to approximately $1 billion, and the number of billion-dollar-plus CVs surged 57%.
Sources: PitchBook 2025 Annual US VC Secondary Market Watch; PitchBook Q1 2026 US VC Secondary Market Watch; Dechert 2026 Global PE Outlook; Bain & Co. 2026 Private Equity Report.
The Core Problem: Founders Still Plan Around an Exit That Rarely Comes
Most founders build their financial planning around two endpoints: get acquired or go public. Everything else is a consolation prize. This framing made sense when the median time to IPO was five years and M&A multiples were generous. It makes no sense in a market where only 62 venture-backed companies went public in 2025 and the path from Series A to IPO stretches past a decade.
The structural shift is threefold. First, companies stay private far longer, which means founders, employees, and early investors carry illiquid positions for a decade or more — with real personal financial consequences. Second, the IPO market has become selective to the point of exclusion. Only the largest, most profitable companies can realistically access public markets; the rest face a closed window with no clear reopening date. Third, LP pressure on fund managers to return capital has created an institutional buyer base for secondary transactions that simply did not exist five years ago. Pension funds, endowments, and secondary-specialist firms are now actively seeking exposure to late-stage private companies.
Yet most founders treat secondaries as a last resort — something you do when you can’t get a “real” exit. This is a category error. A secondary is not a distressed sale. It is a capital markets instrument that allows founders to de-risk personal exposure, reward early stakeholders with actual cash, and extend their runway for building — all without forcing a premature M&A process or an IPO the company is not ready for.
The Institutional Lens: What Professional Investors See That Founders Miss
From the fund manager’s side, the calculus is clear. LPs are demanding distributions. The average PE fund vintage from 2018–2021 is sitting on significant unrealised value with limited near-term exit options. Traditional IPO and M&A pipelines have not kept pace with the capital deployed during the zero-interest-rate era. Continuation vehicles let GPs hold their best assets longer while returning capital to LPs who need it — an elegant solution to a structural mismatch.
The institutional adoption curve is steep. Nearly 75% of the largest global private equity firms have executed at least one continuation transaction, according to Bain & Co.’s 2026 report. A quarter of GPs have initiated or completed a CV recently, and 40% expect to explore one in the next two years. Regionally, more than half of APAC respondents and 51% of North American respondents plan to increase dealmaking using GP-led secondaries in the next 24 months — up from 10% and 22% respectively just one year ago.
For founders, this institutional adoption matters for a practical reason: it creates a liquid buyer base. When pension funds, sovereign wealth funds, and specialist secondary firms are actively looking to acquire positions in late-stage private companies, the pricing, structure, and speed of secondary transactions all improve. You are no longer negotiating with a single opportunistic buyer offering a steep discount. You are accessing a market with real price discovery.
The concentration risk is real, however. PitchBook data shows the top 20 names account for 81% of secondary trading value. If your company lacks the scale and brand recognition of a SpaceX or Stripe, the secondary market is thinner and less liquid. But the market is broadening: Hiive’s marketplace now tracks roughly 1,400 active private-market issuers, and the number of board-sponsored tender offers has roughly tripled since 2021. Platforms like Forge, EquityZen, and Nasdaq Private Market are competing aggressively to bring structured liquidity to mid-cap private companies.
The Founder’s Secondary Playbook: A Six-Stage Framework
Stage 1 — Assess Your Liquidity Window
Meaningful secondary liquidity becomes realistic during or after a Series B. By this point, the business has demonstrated traction, de-risked its core model, and established a growth trajectory that gives buyers confidence. Before Series B, secondary demand is thin and any sale risks signalling desperation rather than sophistication. Time your move to coincide with a strong operating period, not a desperate one.
Stage 2 — Size It Right
The informal benchmark is up to 10% of your vested holdings. Selling a defined, modest portion signals calculated de-risking, not a dash for the exit. Exceed 20% and you will face hard questions from your board, your investors, and your next-round leads about your conviction in the business. Keep it disciplined. The goal is to take enough off the table to remove personal financial pressure without undermining your alignment with the company’s long-term trajectory.
Stage 3 — Choose Your Structure
Three primary structures exist, each with distinct mechanics. A direct sale works for fewer than 10 sellers — straightforward, handled through lawyers, with minimal regulatory overhead. A company-sponsored tender offer is required when more than 10 sellers participate. These are SEC-regulated, typically managed through platforms like Carta or Nasdaq Private Market, with a 20-business-day minimum open period and fees in the 2–3% range. A secondary SPV aggregates multiple sellers into a single vehicle, pooling investor capital at a negotiated price. SPVs are increasingly popular but add a layer of management fees and carried interest that can eat into proceeds.
Stage 4 — Navigate the ROFR
Your company’s legal documents almost certainly give the company and its major investors a Right of First Refusal on any share transfer. You must offer the shares to them before selling externally. This is not optional and not something you can work around. Build ROFR timelines into your planning — they typically add 30 to 60 days to the process. Start the conversation with your board early so the ROFR exercise does not become a blocking event.
Stage 5 — Price With Eyes Open
Secondary transactions are typically priced at a 10–20% discount to the latest primary round valuation. This is normal market mechanics, not a red flag. The discount reflects illiquidity, information asymmetry, and the absence of the governance rights and protections that primary investors receive. If a buyer demands more than a 25% discount, either your last round was overpriced or you are talking to the wrong buyer. Shop the market — multiple platforms now offer competitive bidding.
Stage 6 — Control the Narrative
A well-structured secondary creates no market signal whatsoever. A poorly structured one becomes the story. Work with your board and lead investors before initiating the process. Position the transaction as a retention and alignment tool, not a personal cash-out. If employees are also selling, frame it as a company-wide liquidity programme. Coordinate timing with a strong operating quarter or product milestone. The best secondaries are the ones nobody outside the cap table even knows happened.
The Verdict
The venture industry spent two decades telling founders that liquidity comes at the end — after the IPO, after the acquisition, after the journey is complete. That model assumed companies went public in five to seven years. They don’t anymore. The median path to exit now stretches past a decade, and the IPO window opens for a select few.
The secondary market is not a workaround. It is a $106 billion infrastructure layer that lets founders, employees, and early investors access real liquidity without forcing a premature exit. The founders who understand this will build longer, retain better, and negotiate from strength. The ones who don’t will keep waiting for an IPO window that may never open for them.The exit nobody talks about is the one that lets you keep building.