The secondaries market for limited partner stakes in venture capital funds and shares in private startups has seen an increase in interest from market participants, a result of a slowdown in traditional exits like initial public offerings.
According to PitchBook, as of the end of the year’s first quarter, the U.S. VC direct secondary market was estimated at $60 billion, an increase from the estimate of $50 billion in 2024, as the asset class enters its third year of an exit drought.
The VC secondaries market is also outpacing IPOs among common exit routes for investors in VC funds. From April 2024 through March 31, secondaries accounted for 29.2% of exit activity, outpacing public listings at 27.7%. Still, acquisitions were most common, at 44.1%, according to PitchBook.
Secondaries stakes are often sold at steep discounts. While private equity buyout stakes on the secondaries market are often sold at a discount of about 10% to 15% of net asset value, VC secondaries’ discounts far exceed these.
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“With public market comps down and many private companies avoiding new rounds, secondaries buyers are stepping in to purchase interests at deep discounts, sometimes 30% to 70% off [valuations from] the last [fundraising] round,” says Mike Blankenship, Winston & Strawn LLP’s capital markets co-chair of and managing partner of its Houston office.
According to PitchBook, some startups are taking discounts of between 30% and 60% off their previous valuations. Still, PitchBook noted that secondary sales of top companies are priced with minimal discounts. The firm also noted that VC secondary dry powder has more than doubled since 2022. That year, VC secondary dry powder stood at $4.2 billion, increasing to $9.8 billion in 2024.
Tapping the secondaries market is one way VCs, LPs and the employees of startups can access liquidity in lieu of traditional exits.
Global VC exit activity
Exit value ($B)
Exit count
Estimated exit count
Source: PitchBook
“The denominator effect is still real, and most LPs are prioritizing re-ups with managers who can show distributions,” says Nik Talreja, CEO of private market infrastructure provider Sydecar. This is pressuring managers to think creatively about liquidity, he says. “Selling via a secondary transaction is one of the clearest paths to meet that demand without waiting on the IPO market to reopen.”
State of IPOs, Exits
The main factor driving the rise of VC secondaries transactions is the lack of traditional exits for equity holders, says Scott Chou, venture capitalist and CEO of the Employee Stock Option Fund.
A slowdown in IPOs and other activity began amidst uncertainty related to tariffs and economic policy. Companies like Stripe, Klarna and StubHub reportedly put their IPO plans on hold. However, the IPO market appears to be thawing, with notable public listings like Circle Internet Group, Voyager Space and eToro occurring this year.
Global VC exit count by type
Public Listing
Buyout
Acquisition
Source: PitchBook
“Markets are generally high, and public investors appear to be willing to invest in unprofitable companies again,” says Faraz Shooshani, managing director of and senior private markets consultant at Verus.
IPOs accounted for roughly $138.2 billion of venture exits in 2024, the lowest since 2017, according to PitchBook. VC-backed IPOs face a challenge, as many investments were made at high valuations in 2020 and 2021.
In the first quarter of 2025, approximately $56.2 billion in venture-backed IPOs occurred, nearly half of which came from Coreweave’s IPO.
“We don’t believe that the lack of risk appetite in public markets is driving the reduced demand for venture-backed IPOs,” Shooshani says. “Rather, it is excessively high valuations in 2020-21, the need to sell at an even a higher price and the unwillingness of public investors to buy at lofty valuations that [are] holding back the IPO exits.”
Global VC exit value ($B) by type
Public Listing
Buyout
Acquisition
Source: PitchBook
Employee Liquidity
Employees of venture-backed startups are also tapping into the secondaries market to access liquidity amidst a slowdown in other kinds of exits, opening up room for other VCs and LPs to buy out their stakes in individual companies.
“Participating in the secondaries market allows those employees and early investors to unlock value in advance of an IPO,” says Kerry Potter McCormick, a private funds and investment management partner in Perkins Coie LLP.
Chou notes that one accelerating is the rise of company-sponsored tender offers. Large unicorn startups have been using these formal secondaries offerings to provide their own employees liquidity, while these companies remain private and await improving market conditions.
“On the institutional side, VCs often participate as buyers in these tenders, using them as opportunities to increase their stake in companies where they have strong conviction, often at favorable pricing,” Chou says.
Joseph Morrison, a partner in and the emerging companies and venture capital chair of law firm Barnes & Thornburg, notes that since the COVID-19 pandemic, founders and executives of startups have increasingly taken pay cuts and have recently turned to secondaries to alleviate financial pressure.
“With the markets opening back up and some normalization in financing trends, venture investors are happy to provide some liquidity to founders to alleviate built-up financial pressure,” Morrison says. “Even if that means the secondary comes at a discount to the actual financing round valuation.”
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Tags: secondaries, Venture Capital
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