Hi! I’m glad you’re here. You’ve made it to issue #110 of VC Demystified🪄.

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Imagine you bought a ticket to a sold-out concert. A week before the show, something comes up and you can't go. You can't get your money back from the venue. BUT you can sell your ticket to someone else. You walk away with cash and the other person walks away with the concert ticket but the venue had nothing to do with it.

That's basically how the secondary market works.

In a primary transaction, money flows to the company’s balance sheet in exchange for shares. In a secondary, money flows to the existing equity holder in exchange for their shares. In this transaction, the company does not issue a single new share nor do they get any cash to their balance sheet (no new tickets printed, just someone selling theirs).

Venture capital used to be a 7-10 year game. You invest early, you wait for an IPO or acquisition, you get paid. That's not the world we're in anymore! The average time from founding to IPO is now around 16 years (per Carta). Companies like SpaceX, Anthropic, and Stripe have raised billions of dollars and are worth hundreds of billions, but they're STILL private. Investors who wrote checks in 2015 are still waiting for liquidity. Early employees who joined in 2017 are still waiting too.

People can't always wait that long. That’s where the secondary market comes in.

Total VC secondary transaction value reached an estimated $61.1 billion in the 12 months ending June 2025, surpassing the combined value of all VC-backed IPOs over that same period.

Meaning: The secondary market for private company shares is now bigger than the IPO market.

And here's the stat that really reframes things: the average last-round valuation of the most sought-after companies in the private secondary market is now approximately $120 billion. The average market cap of an S&P 500 company is around $122 billion. Private is no longer a waiting room before the main event. For many of the most important technology companies, the private market is the market.

The 4 types of secondary transactions

1. Direct Secondary: One investor sells shares directly to another. The company isn't organizing the sale. One wrinkle: most companies have a Right of First Refusal (ROFR) - the right to buy those shares themselves before any outside buyer can. Think of it like a neighbor who has first right to buy your house before you list it publicly.

2. Tender Offer: A company-organized liquidity event. The company opens a formal window, sets a price, and allows eligible shareholders to sell a portion of their vested shares. Stripe ran one at a ~$90 billion valuation. Canva ran one that let employees and investors sell over $1 billion in shares. Not going public. Just letting people take some chips off the table.

3. LP-Led Secondary: A limited partner sells their stake in a VC fund to another LP. The underlying companies don't change. Just the ownership of that fund position moves.

4. GP-Led Secondary: A fund manager moves portfolio stakes into a new continuation fund - returning capital to original LPs while staying invested in companies they still believe in.

Now let’s get into which companies are the most sought-after on the secondary market right now, what that signals about where the smart money is going, and how secondary shares are priced.