Venture secondaries have historically lagged their buyout counterparts in capital formation. However, a convergence of trends is beginning to widen market capitalization and drive greater activity.
For one, the slowdown in IPOs and M&A since 2022 (while now slowly recovering) has left company shareholders and institutional investors waiting longer for realizations, prompting a growing reliance on the secondaries market for both liquidity and portfolio management.
For example, large unicorns, such as OpenAI, Canva, Stripe, and Databricks have increasingly leveraged tender offers for liquidity management in recent years. Momentum is also evident across LP- and GP-led secondary transactions. Venture fund managers have started to embrace continuation funds — widely used in private equity — to manage liquidity while retaining upside.
High-profile transactions from firms, such as Lightspeed, NEA, and Insight Partners, for example, demonstrate the growing adoption of these tools. LPs, too, have leveraged the secondaries market to manage their own liquidity needs, shed non-core fund relationships, and serve other portfolio construction purposes. Cumulatively, these trends have led venture secondary activity to reaccelerate after several years of muted activity.
According to PitchBook, the US VC secondary market across direct and GP-led stakes reached an estimated $94.9 billion as of Q3 2025. LP-led venture secondary volume also rose sharply in the first half of 2025, representing 22% of total LP-led secondary market activity — up from 8–12% over the past three years. Here, we examine the trends and structural factors within the venture ecosystem that are driving increased expansion.
Primary and secondary markets in venture are positively correlated, and the post-2022 downturn has weighed heavily on both. The same valuation pressures that stalled primary dealmaking have rippled into the secondary market, suppressing activity in recent years. In 2022 and 2023, sellers remained anchored to peak prices paid during frothy pandemic era dealmaking, while buyers recalibrated to reflect public market comps.
The resulting bid-ask spread not only weighed on primary venture deals and exits, but in turn, the ability for deals to transact in the secondaries market. Now, several years into the post-ZIRP economic landscape, fund managers have marked down their venture holdings, while many startups have either reset their valuations or grown into the prices set in their last rounds.
At the same time, the pickup in primary rounds has provided fresher pricing signals and clearer valuation benchmarks, further stabilizing the market. Together, these factors have tightened bid-ask spreads, improved pricing, and helped reaccelerate secondary activity.
However, beyond improving venture dealmaking conditions helping bolster pricing and activity, a set of deeper structural forces point to greater capitalization and growing momentum on both the supply and demand sides of the market in the years ahead.
The past decade has marked a defining chapter in venture capital’s evolution. During the 2010s, LPs dramatically increased their allocations to the asset class, unleashing an unprecedented wave of capital. According to Industry Ventures, between 2012 and 2022, venture firms amassed $1.7 trillion in assets under management — more than quadruple the $406 billion raised in the previous decade.
A key driver of the sharp increase in capital raised has been the rise of mega-funds. These record-sized vehicles have allowed private companies to secure financing much later in their development than was previously possible. In the 1990s and early 2000s, access to public markets was crucial for expansion, with many of the era’s most prominent companies going public within five to eight years of founding.
Today, that timeline has nearly tripled. For example, Apollo research shows that the median age at IPO has climbed from five years in 1999 to eight years in 2022 — and now sits at an extraordinary 14 years. At the same time, the threshold to IPO has never been higher.
Prior to 2018, the median revenue at IPO was $90 million. Fast forward to today, and that bar has soared, with firms now requiring between $300 million and $600 million — or even more — to clear the rigorous standards set by public markets. Recent IPOs illustrate this trend vividly: Reddit reported $804 million in revenue at its offering, Rubrik brought in $628 million, and Klaviyo posted $585 million.
Meanwhile, the majority of IPOs in 2025 surpassed the $1 billion annualized revenue mark prior to listing, signaling a new era where scale is paramount. Ironically, companies that clear these revenue hurdles often have little incentive to go public when private markets can supply the capital they need without the regulatory burden, disclosure mandates, and steep costs that come with an IPO.
Compounding the structural shifts in IPO markets and private capital availability is the sharp slowdown in venture exits in recent years, which has intensified the overhang of privately held unicorns. PitchBook data shows that more than 40% of these companies raised their first venture round over a decade ago, leaving LPs, GPs, founders, and employees with far more value locked up — and for much longer — than expected.
In this environment, secondaries have increasingly served as a crucial release valve. In 2024, an estimated 71% of all venture exits occurred through the secondary market, and throughout 2025, these transactions have continued to provide a meaningful channel of liquidity. This said, throughout 2025, venture exit markets have meaningfully rebounded. Global listings generated $85.3 billion in exit value through the third quarter of 2025, a 369% YoY increase.
Here, some may argue that revived IPO and M&A markets, combined with several years of weak venture fundraising, could dampen the capital conditions outlined above and reduce the need for secondaries as a liquidity mechanism.
The headline figures, however, mask a more challenging reality. Exit counts remain at or below pre-pandemic levels, suggesting a recovery that is concentrated rather than pervasive, in line with trends across the broader private capital dealmaking environment. Even if IPO markets returned to their historical peak activity, the exit capacity would fall far short of what’s needed to clear the massive backlog of unrealized portfolio value that has accumulated.
All is to say, there are multiple signals suggesting that the trend of “fewer but bigger” IPOs is likely to persist. As a result, institutional investors, fund managers, and founders will have ongoing incentives to execute secondary transactions for portfolio rebalancing and liquidity management, contributing to enhanced supply in the years to come.
As venture returns stretch over 15-year horizons, the timing of LP returns in seed-stage investments has come into sharper focus. Today, as IPOs and M&A deals grow larger but less frequent, seed and pre-seed managers are rethinking the traditional “buy and hold” approach, with many taking a more strategic view on timing exits and delivering returns for their LPs.
For example, in a recent TechCrunch interview, Charles Hudson, founder of pre-seed firm Precursor Ventures, described an exercise his LPs asked him to run to analyze portfolio outcomes. Hudson’s LPs asked him to model the fund’s results if every portfolio company had been sold at Series A, B, C, and so on. The analysis showed that had he sold everything at the Series B stage, the fund would have posted a return north of 3x.
Kate Beardsley of Hannah Grey, a seed-stage fund, has likewise emphasized the growing importance of proactive liquidity management in shaping the firm’s exit strategy. In a recent LinkedIn essay, she noted that every company in the portfolio now undergoes a “liquidity readiness” review, assessing growth, margins, and other key metrics the firm continually tracks and benchmarks.
Ultimately, ventures shifting time horizons are shaping how early-stage managers leverage the secondaries market. For example, Hudson noted that “selling private startup stock” to other investors could account for “75% to 80% of distributions to LPs over the next five years.”
Further, beyond serving as a liquidity tool, secondaries play a broader role in portfolio management for early-stage venture investors. They enable more efficient recycling of capital into other portfolio companies and help managers better serve LPs by helping them optimize tax outcomes, ensure sufficient cash to cover management fees, and more.
Yet, leveraging secondaries is far from straightforward. The companies that attract the strongest secondary demand are often the very ones managers are most reluctant to sell. Venture investors Fred Wilson and Michael Kim have noted that early-stage managers are often best served by taking a measured approach, selling enough of a position to return a meaningful share of the fund while retaining the rest to preserve exposure to future upside.
The dynamics outlined above suggest that supply in the venture secondaries market is set to expand in the years ahead. Concurrently, rising demand for venture secondaries is likely to support further capitalization. Despite subdued primary fundraising in recent years, venture capital remains the principal source of financing for the technology themes driving global value creation, from artificial intelligence to defense and cybersecurity.
Maintaining exposure to venture, therefore, proves essential to capturing returns from sectors poised to deliver significant productivity gains and economic growth. Yet the extended liquidity timelines of the asset class present challenges for some LPs — particularly pensions — that have greater liquidity or liability needs.
Distribution data from the Washington State Investment Board highlights how elongated VC DPI timelines have hit pensions’ portfolios. As seen in the below graph, the liquidity environment since 2022 has notably lengthened the j-curve in their venture portfolio. While well-capitalized pensions can perhaps weather longer capital lock-ups, those with weaker funding ratios face real challenges when capital is tied up for 15 years or more and projected cash flows fall short of expectations.
Here, venture secondaries offer cash-constrained LPs and those with shorter time horizons a path to venture-style returns without the decade-plus wait. Secondaries also allow LPs to invest at a favorable entry point, often once a fund’s winners are clearer or a company’s growth trajectory is accelerating, enabling them to capture returns after some derisking has occurred and as the power law begins to take hold.
Moreover, top-tier venture firms remain notoriously hard to access, making secondaries one of the few viable avenues for investors to gain exposure to brand names.In addition to institutional demand, the recent acquisitions of Industry Ventures by Goldman Sachs, Forge by Charles Schwab, and EquityZen by Morgan Stanley underscore the growing role secondaries may play in providing pre-IPO exposure to retail and private wealth investors.
For example, speaking on Goldman’s third-quarter earnings call about the Industry Ventures acquisition, CEO David Solomon noted that the deal would give the firm the ability to offer clients entry into private market opportunities that have historically been difficult to access, as it positions itself as the leading platform for high-net-worth wealth management.
Cumulatively, rising interest from retail, private wealth, and institutional investors looks poised to drive an influx of capital into venture secondary strategies. That momentum is already evident. According to PitchBook, dry powder dedicated to venture secondary funds reached $5.7 billion in the third quarter of 2025, supported by several high-profile fundraises in recent years, including StepStone’s $3.3 billion vehicle — the largest dedicated venture secondaries fund to date.
This said, when measured against the dry powder held by primary venture funds, venture secondaries account for just 1.8% of total venture capital dry powder, suggesting considerable room for growth. Further, venture secondaries remain far behind their buyout counterparts in market penetration. As of 2024, venture secondaries transaction activity yielded a penetration rate of just 0.5 percent, compared to 2 to 3 percent for buyout secondaries. Ultimately, despite strong growth tailwinds, there remains significant room for expansion.
Further, the market faces unique challenges and considerations compared to other corners of the secondaries market. For one, secondaries activity is extremely concentrated in sought after startups. According to Caplight, 83% of the trading volume in Q3 2025 occurred in just 15 companies. While venture’s power law dynamics make some degree of this dynamic inevitable, it also constrains market growth and caps the liquidity that can be generated at scale.
Additionally, venture secondaries face distinct obstacles compared to their buyout counterparts, including lower deal volume, limited information flow, GP restrictions, and more ambiguous valuation benchmarks. Venture firms hold minority stakes, meaning they can’t “force” exits. As Ravi Viswanathan, founder of VC secondary firm NewView Capital says, this often means there is an “evangelical” aspect to getting deals across the line that involves engaging a complex group of stakeholders.
Further, nearly all startups impose transfer restrictions — most notably rights of first refusal (ROFR) that allow companies or existing investors to match any secondary offer, effectively granting them veto power over transactions. Here, double layered special purpose vehicles (SPVs) have emerged as a workaround, though not without friction.
The structures allow investors to sidestep traditional approval processes, a development that has prompted backlash from founders seeking to maintain control over their shareholder bases. For example, OpenAI and Anthropic recently instituted outright bans on SPV transactions. These ROFRs are also starting to appear in LP agreements, holding implications for LP-led transactions, too.
Ultimately, as the venture secondaries market continues to expand, investors who play across multiple segments of the market may hold a structural advantage. Those purchasing LP stakes, for instance, gain access to financial information across a wide range of portfolio companies. That insight can later inform where they choose to concentrate capital — whether through direct secondaries or GP-led transactions — ultimately turning information asymmetry into an investment edge.
Check out our Continuation Fund Report to explore the growing momentum behind these tools across the venture landscape.
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