Secondary Markets Are Harder to Ignore

Secondary markets are becoming harder to ignore because they now solve a real liquidity problem for private-company employees, founders, early investors, private funds, and institutions. What used to feel like a niche corner of finance is now a larger, more organized channel for buying and selling private assets before a traditional exit.

If you’re tracking private markets, employee stock options, pre-initial public offering shares, or private equity secondaries, you can’t treat this area as background noise anymore. The growth is being driven by longer private-company timelines, more mature trading platforms, and institutional demand for flexible exit routes. This article explains why secondary markets are expanding, how they work, where the risks sit, and what you should review before treating them as part of an investment plan.

What Exactly Are Secondary Markets And Why Do They Matter Now?

A secondary market is a place where existing ownership interests are bought and sold after the original issuance. In private markets, that can mean shares of a late-stage startup, limited partner interests in a private equity fund, or exposure to assets that are not traded on a public exchange.

The primary market is where capital first goes to the company or fund. The secondary market is different: one investor sells to another, and the company or fund may not receive new capital from that transfer. That distinction matters because the value of secondary markets comes from liquidity, price discovery, portfolio management, and optionality. You’re not only funding growth; you’re creating a way for existing holders to adjust their position before a formal exit.

Secondary markets matter now because private ownership lasts longer than many investors expected. PitchBook reported that the median time from first venture capital funding to exit stretched to 8.2 years, which means employees, early backers, and founders can wait a long time before their equity becomes cash. That waiting period creates pressure. A well-run secondary transaction can relieve that pressure without forcing a company to rush into an initial public offering.

Why Are Secondary Markets Growing So Fast?

Secondary markets are growing fast because private assets have become larger, older, and harder to exit on a fixed timeline. Buyers want access, sellers want liquidity, and companies want more control over how ownership changes hands.

Bain & Company reported global secondary market volume of about $100.6 billion in 2023, making it the second-highest year recorded after the prior market peak. Preqin projected that the secondary market would exceed $500 billion in assets under management by 2028. Those numbers point to a market that is no longer small, experimental, or limited to specialist funds. It now sits inside the operating plan of many private equity managers, venture investors, and late-stage private companies.

The growth also reflects a practical shift in investor behavior. Limited partners may want to rebalance private fund exposure, reduce unfunded commitments, or free capital for new strategies. General partners may want more time to manage strong assets through continuation vehicles. Employees and early shareholders may need cash for taxes, housing, diversification, or personal financial planning before the company reaches a public listing or acquisition.

How Do Secondary Markets Work For Private Company Shares?

Private-company secondary transactions usually involve an existing shareholder selling shares to an approved buyer through a structured process. The company often has transfer restrictions, approval rights, or a Right of First Refusal, which means the sale is not as simple as placing a trade in a public brokerage account.

A typical process starts with a seller, a buyer, and a price indication. The platform or intermediary may help confirm eligibility, gather documents, coordinate company approvals, and manage settlement. The company may review whether the buyer meets its rules and whether the transfer fits its ownership policy. If the company exercises its Right of First Refusal, it can often step in and buy the shares itself or assign that right to another approved party.

You should expect less information than you’d receive with a public stock. Private companies do not publish the same regular reports available from listed companies, and buyers may have limited access to financial statements, customer metrics, or recent board materials. That information gap affects price. A discount to the latest preferred share valuation may be reasonable in one deal and insufficient in another, depending on company performance, investor rights, share class, transfer limits, and demand.

Why Are Employees And Early Backers Demanding Liquidity?

Employees and early backers are demanding liquidity because private equity value does not pay bills until it can be sold or converted into cash. Longer company timelines can leave people with large paper gains, tax questions, and limited diversification.

Morgan Stanley at Work reported that 82% of startup employees cited lack of liquidity as a major financial stressor. That finding matches what many compensation teams already see: equity can be motivating, yet it can also create financial strain when workers cannot sell any portion of their holdings. Stock options add another layer, since exercising options can require cash before the employee knows when a real exit will happen. For some employees, a tender offer or approved secondary sale can turn equity from an abstract benefit into usable money.

Early investors face a related problem. Venture funds and angel investors may hold positions for years longer than planned, especially when initial public offering windows slow down. A partial secondary sale lets them return capital, manage fund timelines, or reduce concentration without abandoning the company entirely. That makes secondary liquidity a pressure valve, not simply a quick exit.

What Platforms Are Fueling Secondary Market Activity?

Platforms are fueling secondary market activity by standardizing parts of a process that used to depend on private networks, manual paperwork, and one-off negotiations. Forge Global, EquityZen, Carta, and Nasdaq Private Market are among the names tied to broader access and larger transaction programs.

Forge Global processed a record $2.5 billion in notional secondary volume in 2023, up from $1.8 billion in 2022. Nasdaq Private Market reported more than $7 billion in total transaction volume in 2023, driven by tender offers and block trades for later-stage private companies. Carta reported a 59% year-over-year increase in secondary transaction volume on its platform in the fourth quarter of 2023. EquityZen reported that waitlist sizes per company grew 40% year over year by mid-2023, showing continued demand from accredited investors seeking pre-initial public offering exposure.

The role of these platforms is not just matching buyers and sellers. They can support tender offers, cap table coordination, compliance checks, document flow, and settlement workflows. That matters because private share transfers carry more friction than public trades. The better the process becomes, the easier it is for companies to offer controlled liquidity without losing sight of ownership limits and governance needs.

What Are General Partner-Led Deals And Continuation Funds?

General partner-led deals are secondary transactions initiated by the private fund manager rather than a limited partner selling an interest on their own. A continuation fund is a structure that lets a manager move one or more assets into a new vehicle, giving existing investors a choice to cash out or keep exposure.

Evercore reported that general partner-led deals made up roughly 45% to 50% of total secondary volume in 2023. That share shows how far the market has moved beyond the older image of secondary transactions as limited partners quietly selling fund stakes. In a continuation fund, the manager may believe an asset still has room to grow, but the original fund is approaching the end of its planned holding period. Existing investors can sell, roll their interest, or make a decision based on their own liquidity needs.

These deals can be useful, but they require careful review. You need to look at valuation, process quality, buyer participation, fees, conflicts, and whether investors received enough time and information to choose. The same manager often sits near the center of the transaction, so governance matters. A strong process can create flexibility; a weak one can leave investors questioning price and alignment.

What Risks Should You Review Before Buying Or Selling?

The main risks in secondary markets are valuation uncertainty, limited information, transfer restrictions, platform execution, tax treatment, and timing. You should review each one before assuming a secondary price reflects fair value.

Valuation is the risk most buyers notice first. A private-company share price may be based on a prior financing round, recent secondary bids, a tender offer, or negotiated buyer demand. None of those gives you the constant market feedback that public stocks provide. You need to compare the share class, liquidation preferences, company performance, revenue quality, burn rate, competitive position, and any discount attached to illiquidity.

Sellers have their own risks. Selling too early can reduce upside if the company later lists or sells at a stronger valuation. Selling after exercising options can create tax planning issues, including potential Alternative Minimum Tax exposure, depending on the type of option and the seller’s situation. Company approval can also delay or block a transaction, so you should not treat a signed buyer indication as guaranteed cash. Professional tax and legal review is often worth the cost before you commit.

How Are Secondaries Reshaping Initial Public Offering Timelines And Exit Strategies?

Secondary markets are reshaping exit strategies by giving companies and investors more ways to manage liquidity before an initial public offering or acquisition. They do not remove the need for exits, but they can reduce the pressure to time an exit around short-term liquidity needs.

A company that can offer periodic tender programs may retain employees who would otherwise feel trapped by illiquid equity. It can also manage who joins the shareholder base, how much stock changes hands, and whether sales occur in an orderly process. That control can be valuable when a company wants to stay private longer to grow revenue, improve margins, or prepare for public-company scrutiny. A secondary program can give holders partial liquidity without turning the company’s ownership into an open market.

Investors should avoid the simple claim that secondaries replace public listings. A mature private company may still need public capital, acquisition options, brand visibility, employee liquidity at scale, or a cleaner path for future financing. Secondaries change the timing and bargaining position. They make the exit menu wider, which changes how boards, funds, and employees think about the path from private ownership to realized value.

What Do Secondary Markets Mean For Individual And Institutional Investors?

For individual investors, secondary markets can offer access to private companies before a public listing, but that access comes with information limits and liquidity risk. For institutional investors, secondaries are becoming a routine tool for portfolio construction, liquidity management, and exposure to mature private assets.

If you’re an individual accredited investor, you should compare access against risk. Pre-initial public offering shares can look attractive when the company name is familiar, yet name recognition does not equal a fair entry price. You need to review fees, minimum investment size, transfer rights, settlement timing, share class, and the platform’s process for confirming availability. You also need to know whether you can sell later, since your exit may depend on company approval and future buyer demand.

If you manage institutional capital, the decision set is different. You may use limited partner-led secondaries to adjust vintage exposure, reduce manager concentration, or create liquidity. You may evaluate general partner-led deals to keep exposure to selected assets under a new fund term. Across both groups, the discipline is the same: measure price against information quality, expected holding period, governance, and the reason the seller is offering the asset now.

Why Secondary Markets Are Becoming Harder To Ignore

Companies stay private longer.
Employees need liquidity.
Platforms reduce friction.
Funds use secondaries to exit or extend holdings.

The Road Ahead For Private Market Liquidity

Secondary markets are becoming a permanent part of how private assets are managed, valued, and traded. The next stage is likely to reward better process quality rather than simple access. Companies will need clear rules for tender offers, investors will need sharper valuation discipline, and platforms will need reliable settlement and data standards. Private equity managers will keep using continuation funds when a full exit does not fit the asset or the fund timeline. You should watch secondary markets not as a side channel, but as a core signal for liquidity, demand, and pricing pressure across private markets.

References

Chrysilios Chrysiliou

Chrysilios Chrysiliou is a commercial real estate executive at RDPH Properties, Inc. with a diverse background in aviation and entrepreneurship. A former Greek Air Force Academy graduate, flight instructor, and flight school co-owner, he now leverages decades of strategic leadership to identify and develop high-value real estate opportunities.

Why Secondary Markets Are Becoming Harder to Ignore