Conclusion
The venture secondary market provides real but narrow utility. It allows LPs to manage liquidity constraints, gives GPs a mechanism to generate DPI in the absence of exits, offers employees partial liquidity in companies that have remained private far longer than anticipated, and can shorten the J-curve and overall holding period for secondary buyers entering mid-fund lifecycle. GP-led continuation vehicles, in particular, have delivered competitive outcomes in specific contexts, but those results are highly sensitive to manager quality, asset selection, and period, and should not be generalized across the market.
What the data shows more clearly is that the secondary market is not a broad liquidity solution. It is a selective market that clears only for a small set of perceived winners. Activity is concentrated in a handful of companies, and outside that group, assets are not simply discounted; they are often untradeable. The issue is not pricing inefficiency – it is the absence of liquidity altogether.
This distinction matters. A discount implies future upside; illiquidity implies the absence of an exit path. In a power-law system, buying outside the narrow set of assets that dominate secondary demand is not a contrarian strategy – it is a different risk category entirely.
The structural risks follow from this dynamic. Governance in GP-led processes remains uneven, information asymmetry is persistent, and access to the most attractive opportunities is frequently conditional on broader GP relationships. In more intermediated structures, particularly layered SPVs, complexity and time constraints further reduce the ability of buyers to validate what they are acquiring. These are not isolated frictions; they are embedded features of how the market operates.
As a result, sophisticated capital does not allocate to secondaries because the market as a whole is attractive. It allocates because, in specific cases, secondaries provide selective access to a narrow set of elite, oversubscribed private companies that are otherwise inaccessible through primary markets. That access is scarce, relationship-driven, and not scalable across the full opportunity set.
The key question for any buyer is therefore not whether secondaries are growing, but whether the specific asset they are acquiring sits within the narrow segment of the market that will ultimately exit, and on what timeline. Historical performance, largely driven by pre-IPO exposure to a small number of exceptional companies, may not be indicative of what capital deployed today will experience.
The secondary market does not resolve the underlying tensions in venture capital. It is a consequence of them. It concentrates liquidity around a small number of assets, leaves the majority of the market untouched, and, where misapplied, transfers risk from informed sellers to less-informed buyers. In that sense, it does not smooth the venture cycle; it makes its structural asymmetries more visible.
This prompts a set of important considerations regarding the optimal level of secondary capital in venture capital, and whether it can mature into an asset class capable of delivering consistent performance comparable to private equity.
This article was produced in collaboration with Reference Capital, a specialized venture capital investment firm based in Geneva, Switzerland (www.referencecap.com).