Introduction
For most of the history of venture capital, liquidity was a binary event. You either waited for an IPO or an acquisition — and until one of those happened, your equity was essentially illiquid. Founders, early employees, and early investors held paper gains that could vanish as quickly as they appeared, with no mechanism to realize any value before the ultimate exit.
That model has fundamentally changed. The secondary market for private company equity has moved from a niche, stigmatized workaround to a mainstream, institutionalized pillar of private markets infrastructure — and the numbers in 2025-2026 make the scale of this transformation impossible to ignore.
Global secondary transaction volumes hit a record $240 billion in 2025 — a 48% year-over-year increase, surpassing $200 billion for the first time in the market’s history. J.P. Morgan projects secondaries could reach $300 billion annually within the next 12-24 months. For anyone operating in the startup ecosystem today, understanding how this market works and what it means for founders, employees, and investors is no longer optional — it is a core strategic literacy.
Why Secondary Markets Have Exploded: The Structural Forces
The extraordinary growth of secondary markets is not cyclical — it is structural, driven by forces that will continue operating regardless of what happens to interest rates or public market valuations.
The IPO Bottleneck Has Created a Liquidity Crisis
The traditional venture exit path — grow to $100M+ ARR, go public — has become dramatically more difficult. The average time from founding to IPO now stretches to 10-12 years, versus 4-5 years in the late 1990s. Rising financing costs, wider bid-ask spreads, and the political and regulatory complexity of being a public company have made traditional exits harder to execute.
The result is a structural bottleneck. Private equity dealmaking remained muted in H1 2025 as trade wars, tariffs, and market uncertainty weighed on valuations. Average holding periods stretched past five years, leaving over $1 trillion of NAV trapped in older vintages and slowing distributions to investors. With PE exit activity remaining more than 50% below 2021 peaks and distributions as a percentage of NAV at historic lows, liquidity pressure has created a large and motivated cohort of sellers.
Private Markets Have Grown to Unprecedented Scale
The combined NAV of private market funds reached $14.5 trillion by the end of 2024 — nearly double the $7.4 trillion recorded in 2019. Private equity AUM in the US alone exceeds $5 trillion. As this universe of assets grows, so does the supply of potential secondary transactions.
Yet secondary trading remains at just 1–2% of total private markets NAV — dramatically below the turnover rates in public markets. Even a modest increase from this historically low level would have a substantial impact on transaction volume. McKinsey’s 2026 Global Private Markets Report describes private equity as now a “mature industry,” with outcomes increasingly shaped by deliberate choices around liquidity management rather than the market dynamics that amplified returns in prior decades.
Record Fundraising Has Built Massive Buyer Capacity
On the demand side, secondary-focused fundraising reached record levels. Closed-end fundraising for secondaries strategies reached 18% of total private capital raised in 2025 — up from just 7% in 2021. Secondary dry powder reached an estimated $327 billion in 2025, with total available capital from secondaries investors estimated at $477 billion when including evergreen retail vehicles and direct LP participation.
Wealth management became the fastest-growing segment of the secondary market in 2025, according to BlackRock — with ’40 Act funds and other evergreen retail vehicles now accounting for nearly one-third of secondary market fundraising. The democratization of secondaries access to retail investors has dramatically expanded the buyer base and is compressing the discounts at which quality assets trade.
The GP-Led Revolution: Continuation Vehicles Become Mainstream
Perhaps the most significant structural development in secondaries over the past three years is the explosive growth of GP-led transactions — particularly continuation vehicles (CVs), in which a fund manager transfers selected assets from an expiring fund into a new vehicle.
In 2025, GP-led transactions grew 39% to $81 billion in buyout secondaries alone, while private credit secondaries experienced near-300% year-over-year growth in GP-led activity. Continuation vehicle volume surged 93% year-over-year in Europe and 34% in North America.
Continuation vehicles have become a permanent fixture in private markets. In 2025, they represented 14% of all sponsor-backed exit volume — cementing their status not as a last resort but as a standard portfolio management tool. For GPs, CVs allow retention of the best-performing assets beyond fund maturity, while providing LPs a binary choice: sell into the continuation fund at a liquidity premium, or roll their interest into the new vehicle and continue participating in upside.
A novel development in 2025 was the rise of “CV-squared” transactions — continuation vehicles built on continuation vehicles — reflecting the market’s growing comfort with multi-stage continuation strategies and the institutionalization of GP-led secondaries as a flexible, long-term asset management tool.
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What This Means for Founders
The secondary market’s growth has specific, practical implications for founders managing their company’s cap table and their own financial planning.
Founder Liquidity is Now Legitimate — And Strategic
The stigma around founder liquidity — the conventional wisdom that founders selling shares before an exit signaled reduced commitment — has effectively disappeared. Secondary transactions that allow founders to achieve financial security while maintaining full operational commitment are now routine.
A founder who has taken $2–5M off the table through a secondary transaction is often a more effective operator: less financially anxious, more willing to take long-term strategic risks, and less susceptible to pressure to optimize for an early exit at a suboptimal valuation. The secondary market has effectively decoupled “I need personal liquidity” from “I need to sell the company” — creating a healthier alignment between founder incentives and long-term company building.
Employee Liquidity Has Become a Talent Weapon
For top-tier technical talent, equity compensation has long been a major component of total compensation at startups. But illiquid equity that can’t be sold for a decade is worth significantly less to an employee than liquid equity.
The most sophisticated founders have recognized that providing early employee liquidity — through structured tender offers or secondary transactions that allow vested shareholders to sell a portion of their position — is a talent retention and recruitment tool. An employee who has sold enough shares to buy a house, pay off student loans, or reduce financial anxiety is more committed, more focused, and more likely to stay through the next phase of growth.
Tender offer platforms and secondary market intermediaries have made this process accessible to earlier-stage companies than ever before. For founders competing for senior engineering and commercial talent, the ability to offer a “liquidity pathway” — not just equity promises — has become a differentiator in recruiting conversations.
Cap Table Management Matters More Than Ever
As secondary markets make equity more liquid and tradable, the question of who owns your equity has become more strategically consequential.
Founders who allow secondary transactions without careful attention to buyer identity can end up with cap tables populated by short-term financial buyers — investors with different time horizons and incentives than the strategic, long-term shareholders who built the company. The most sophisticated founders and boards manage secondary transactions actively, facilitating liquidity for employees and early shareholders while ensuring that new entrants to the cap table bring strategic value, not just capital.
Pricing and Valuation: What the Data Shows
One of the most significant effects of active secondary markets is continuous price discovery for private company equity.
In H1 2025, LP-led secondary pricing for buyout funds — which represented 53% of LP-led volume — averaged 94% of NAV, maintaining the highest pricing levels since the 2021 peak. Average discounts for quality assets narrowed to 5-10%, reflecting improved market confidence and strong buyer demand. The convergence of secondary pricing toward NAV suggests the market has matured to the point where selling is not a distress signal but a portfolio management decision.
A 2024 survey found that 51% of sellers cited portfolio adjustments as their primary motivation for secondary transactions — up from 38% the year prior. The share selling to free up liquidity also increased to 44%. Together, these trends indicate that secondaries have become a regular mechanism for portfolio rebalancing rather than a response to stress or regulatory pressure.
Also Read: The End of the “Growth at All Costs” Operator — And What Replaces Them
The Risks Founders Must Understand
Secondary markets are not without risks and complications. Founders considering secondary transactions should understand several practical challenges.
Information asymmetry creates valuation complexity. Secondary buyers make investment decisions with less information than primary investors who receive detailed due diligence materials. This information gap can produce pricing that doesn’t accurately reflect the company’s current fundamentals — in either direction.
Tax complexity is real and significant. Secondary transactions can have complex tax implications for founders and early employees whose shares may have very low cost basis. Tax planning before any secondary transaction is essential, and the specific structure of the transaction — simple share sale versus tender offer versus continuation vehicle participation — has material tax consequences.
Liquidity ≠ exit. Founders who take significant liquidity through secondary transactions while the company still has a long road ahead should be careful not to misalign their incentives with employees and investors who are still holding fully illiquid positions. The optics and the reality of partial founder liquidity require careful management of internal communication and investor relationships.
The 2026 Outlook
The trajectory of secondary markets is clear. Transaction volume is forecast to approach $300 billion annually in the next 12-24 months. Secondary fundraising is expected to remain strong through 2026, with Campbell Lutyens projecting $130–145 billion and Evercore estimating $200+ billion to be raised over the next 12 months.
J.P. Morgan’s analysis notes that unlike IPOs — which face regulatory delays and public market timing risks — secondaries offer reliable liquidity regardless of broader market conditions. Wellington Management’s 2026 venture outlook identified secondaries as likely to “increasingly become a core liquidity tool” and expects continued market growth as record 2025 fundraising is deployed.
For founders, employees, and investors, the practical implication is straightforward: secondary liquidity is now a planning variable, not an unexpected opportunity. Sophisticated private market participants are building secondary transactions into their financial planning, cap table management, and talent compensation strategies — not as alternatives to primary exits, but as complements to them.
Also Read: The Great Consolidation: Why B2B SaaS is Entering a Zero-Sum Era
Conclusion
The secondary market’s rise from niche to necessary is one of the most consequential structural shifts in private capital in the past decade. The combination of a chronic IPO bottleneck, a $14.5 trillion NAV base of private assets, and record secondary fundraising has created a liquid, institutionalized market that is reshaping how private market equity is managed, valued, and transferred.
For founders, the most important insight is this: liquidity is no longer exclusively determined by IPO or acquisition timelines. The tools exist, the market is deep, and the stigma has dissipated. Using these tools thoughtfully — to provide liquidity to employees who have earned it, to bring in strategic investors at the right moments, and to manage your own financial security without compromising your long-term commitment — is a core skill for the modern founder.
The secondary market isn’t just a financial instrument. In 2026, it is essential infrastructure.
