How VC secondaries became the ‘release valve’ for startup liquidity pressures

Author:

Kevin Dowd

Published date:

1 December 2025

In recent years, the secondary market has become the primary place where many startups and their investors are able to fill the void created by an extended quiet period in the IPO market.

Why VC secondaries are surging

The lengthening of the liquidity cycle has had a clear impact on the fund economics of active VC funds. In many cases, LPs committed capital to these funds thinking the fund lifespan would be somewhere between 10 and 12 years. When that cycle is extended, liquidity is delayed. Jaskel says that some active VC funds may ultimately take 15 to 20 years to exit all of their portfolio positions and fully return capital to their LPs.

But it often doesn’t take that long to identify the top startups. Many companies that are currently still private have long since established themselves as leaders in their respective spaces, including names like SpaceX, Stripe, and OpenAI.

The result of this dynamic is that many funds are holding highly valuable assets that lack a clear pathway to a traditional exit. For investors eager for liquidity, VC secondaries can offer a welcome alternative.

What VC secondaries look like

Venture secondaries are often highly bespoke transactions structured to fit the specific needs of a company or its investors. But there are a few different structures of venture secondary deals that tend to appear most frequently.

Traditionally, most venture secondaries that took place were fund secondaries, where one LP bought a stake in a GP-led venture fund from another LP. Because a fund typically holds positions in many different companies, the buyer in a fund secondaries transaction gets access to a diversified portfolio of venture-backed startups.

But the market is changing. When investors like Jaskel and Slome talk about the recent boom in the VC secondary market, they’re talking mostly about direct secondaries, where an investor buys a secondary stake in a particular company, rather than in an entire fund.

In particular, the market for venture-backed tender offers has been gaining steam in recent quarters, with total transaction value on Carta climbing 68% year over year during Q2 2025.

A nascent market

Different investors approach the secondary market in different ways. Evolution Equity is a cybersecurity investor that uses direct secondaries as part of a strategy that also includes primary investments in new startups. It typically buys secondary stakes directly from investors who are on the cap table. New Vintage, meanwhile, primarily acquires LP interests in venture-backed startups from large allocators, targeting both startup and fund stakes.

Some truths apply regardless of a fund’s specific approach. Venture capital as a whole is a private market where information and access to deals can be difficult to find and an accurate, market-based price can be difficult to ascertain. The venture secondary market tends to be even more opaque. For investors, this puts a premium on access to information, market knowledge, and confidence in pricing.

“Ten or 15 years ago, the secondary market was nascent in venture,” says Richard Seewald, founder and managing partner at Evolution Equity Partners. “But venture secondaries have become more important in portfolio construction over the last five to seven years.”

Why startups choose secondaries

From the perspective of a venture-backed company, the primary motivation for running a tender offer or approving other types of secondary transactions is to provide liquidity to early investors or employees.

Companies might also have other reasons to arrange or support secondary transactions. Offering the chance for liquidity can be a powerful tool for employee retention or for attracting new talent. Secondaries can help a company clean up its cap table or otherwise adjust its financial structure.

In some instances, investors who buy into a secondary round might also invest in primary rounds, or they might be experienced operators who can offer useful strategic guidance. If that’s the case, secondary investors can function similar to investors in a new primary venture round.

The recent surge of interest in venture secondaries is closely linked to the relative dearth of IPOs in recent years. But this doesn’t mean that deciding between a secondary transaction and an IPO is an either/or proposition. Secondaries are typically not an end in and of themselves. For most venture-backed companies, they’re just another step in the long journey from founding to an eventual exit.