How Venture Secondaries Are Becoming a Real Market
Secondaries aren’t just a feature of the market. They’re the new architecture of venture capital.
Republished from Medium.
When Qonto moved €200 million in a single secondary transaction last month, it wasn’t responding to distress or preparing for an IPO. The French fintech had strong financials, disciplined execution, and no immediate need for capital. Instead, it was doing something more strategic: using structured liquidity to upgrade its cap table, reward employees, and position for future scale without diluting existing shareholders. This was deliberate industrial planning at work.
That transaction, coordinated by investment banks and priced for institutional investors, represents a fundamental shift in how mature private companies approach liquidity.
Qonto joins Monzo ($68 million in employee liquidity), Vinted (shareholder restructuring at $5.4 billion), and Revolut (repeat secondary trades) in treating secondaries not as a last resort, but as a strategic instrument. The secondary market has evolved from distressed trading into systematic capital allocation.
This brings me to a broader question about the structural evolution of venture capital in the late cycle. As companies stay private longer and traditional exit timelines stretch beyond the capacity of most fund structures, secondary markets have become the primary mechanism for generating liquidity. But the opportunity is not distributed equally. It follows a clear hierarchy, one that rewards those who understand its mechanics and position themselves accordingly.
Could we be seeing the emergence of a new asset class? The timing, transaction volume, and institutional participation suggest the conditions are in place. If my hypothesis holds, venture secondaries could redefine how value gets unlocked in an era where public markets have become increasingly irrelevant for high-growth companies.
The market operates across four distinct layers.
The notion that different types of companies necessitate distinct approaches to secondary trading is not new. One precedent worth examining is the evolution of high-yield bonds in the 1980s. Before Michael Milken and Drexel Burnham Lambert, corporate bonds were primarily the domain of investment-grade companies with strong balance sheets. Milken’s innovation was recognising that fast-growing companies with weaker credit profiles could access debt markets if priced appropriately for their risk.
As Connie Bruck recounted in The Predators’ Ball:
“Milken believed that a company’s ability to generate cash — even if its reported earnings were negligible or nonexistent-was a far more important determinant of its creditworthiness than its assets or conventional measures of net worth.”
The venture secondary market has developed a similar structure, but based on liquidity rather than credit. Companies are sorted into tiers based on their transaction sophistication and institutional accessibility.
The Flow Layer comprises the global flow names: the Stripe, SpaceX, and Databricks of this world. These companies support regular pricing and institutional trading regardless of public market conditions. Their shares circulate across desks, get sliced into SPVs, and command immediate institutional attention. This is the equivalent of investment-grade bonds in the corporate debt market.
The Structured Layer includes companies entering structured trading for the first time. Beyond Qonto, this tier encompasses GoCardless, SumUp (with a $8.9 billion valuation), and others that have crossed the threshold from private to semi-public trading. These companies have formal processes, broker involvement, and institutional pricing. They represent the high-yield equivalent: more risk, but also more opportunity.
What I call the Emerging Liquidity Layer is where the real opportunity lies today. These are growth-stage companies that have scaled beyond product-market fit but have not yet transacted. They serve regulated sectors, generate real revenue, and attract serious boards. They are moving toward institutional liquidity, but buyers track them with that expectation in mind. This is where secondary alpha gets generated.
The Allocation Layer encompasses Series B and C companies that occasionally support secondary transactions as part of stapled primary rounds, typically structured for allocation rather than price discovery.
But the world has moved on. The context today, characterised by extended private market cycles, differs from the one that drove traditional venture capital during the heyday of quick IPO exits. We do need a new approach to liquidity. Still, the working hypothesis should be centred on current cycle dynamics: the shift toward strategic liquidity management, where secondaries are no longer separate from company planning but increasingly embedded in it.
The third tier drives performance.
The mathematics of venture capital remain unchanged: returns follow a power-law distribution, with most value concentrated in a small number of companies. What’s different is the timeline and the access points. As Fred Wilson noted in his AVC blog about the evolution of venture markets:
“The average time from founding to IPO keeps getting longer and longer and that is having all sorts of repercussions on the startup and venture capital ecosystems.”
— Fred Wilson, AVC (August 2015)
Secondary markets provide an alternative path, but only for those who can identify quality before it becomes obvious. Companies in Tier Three offer this opportunity because they sit at the inflexion point between private obscurity and institutional visibility. They do not appear on secondary platforms, their transactions do not circulate in broker decks, and their cap tables are not yet configured for easy transfer.
This positioning creates inefficiency that skilled secondary investors can exploit. Consider the recent activity: Cohesity enabled $145 million in employee liquidity as it prepares for IPO consideration. Anchorage Digital opened structured secondary windows in late 2024. 6sense sponsored follow-on secondary rounds during growth financings. Ironclad, Lattice, and Via all conducted employee tenders in Q1 2025.
These events signal systematic change. Companies are learning to utilise secondaries as a strategic tool, responding to opportunities rather than pressure. They are managing control, cleaning up early positions, and preparing for future scale. Most importantly, they are creating a template that companies one layer earlier are beginning to follow.
Why does this matter? Because the investors generating outsized returns are those operating one step ahead of this progression. Today’s Emerging Liquidity companies become tomorrow’s Structured opportunities, which eventually graduate to Tier One flow names. The key is moving early enough to capture the valuation gap between private pricing and structured liquidity events.
A framework for systematic opportunity.
Direct secondaries now account for more than one-third of all venture liquidity events. At the same time, structured employee sales represent nearly half of all transactions among companies valued between $2 billion and $10 billion.
These numbers tell the story of market maturation. First came the transactions: ad hoc, relationship-driven, and often reactive. Then came the structure: formal processes, legal frameworks, and institutional protocols. Now comes the scale: regular pricing, predictable volume, and systematic participation.
The pattern is visible across geographies. Dream11 has hosted recurring employee liquidity events throughout 2024 and 2025. Xero maintains regular secondary sales through regional brokers. Careem offers periodic employee and early-investor secondaries ahead of expansion by global funds. Klarna traded over $500 million in secondary shares between 2023 and 2025 during valuation realignment rounds.
What makes these transactions significant is their sophistication. Companies are proactively enabling liquidity rather than waiting for external pressure to drive change. They are designing transactions that support retention, provide alignment for early shareholders, and invite long-term investors into the cap table, all while avoiding the dilution and complexity associated with traditional fundraising.
This creates a clear framework for secondary investment. Focus on companies that have crossed the product-market fit threshold but have not yet attracted institutional secondary attention. Underwrite to quality metrics that predict future liquidity events. Build relationships with founders and early investors before competition intensifies. Structure transactions that provide immediate value while positioning for future upside.
The investors already executing this strategy are building portfolios of companies that will define the next wave of secondaries. They are creating their own deal flow by identifying quality before it becomes consensus.
The real market begins here.
The venture secondary market is becoming institutional, but the logic that drives returns remains unchanged. Success depends on timing, selection, and access. The difference is that timing now means getting into companies that are 12 to 24 months away from structured liquidity events.
This requires direct sourcing capabilities, transaction design expertise, and LPs who understand the opportunity. It requires conviction about company quality and patience with execution timelines. Most importantly, it requires the ability to operate off-cycle, ahead of structured liquidity events that will eventually become visible to the broader market.
The secondary market has moved beyond distressed trading and emergency liquidity. It has become a strategic tool for mature private companies and a systematic opportunity for sophisticated investors. The companies are ready, the capital is available, and the institutional infrastructure is in place.
The real market begins with those who understand these dynamics and position themselves accordingly. The next wave of returns will come from companies that are not yet tradable but will be very soon.