The moment happening thousands of times a week
An engineer I know has been vested at a well-known Series D startup for six years. The company is worth around $8B on paper. There's no IPO in sight. Every all-hands ends with the same non-answer about liquidity.
Last month she logged into Forge for the first time and saw a bid on her shares — 25% discount to the last preferred round, but real dollars, from a real institutional buyer, cleared to close in under 30 days. She's now deciding whether to sell some of what's on paper for what's real.
This is happening thousands of times a week across the ecosystem right now. Startup employees who've been holding illiquid equity for five, seven, ten years are being offered a way to convert paper wealth into actual money. The instrument they're using — the private company secondary market — barely existed as a real thing five years ago. In 2024 it processed over $60 billion in volume. In 2025 it's the primary liquidity mechanism for private company shareholders.
This is the map of that market.
Why the secondary market matters now
The IPO drought created the modern secondary market. In 2021 the standard playbook for a venture-backed company was to IPO within 5-8 years of Series A. That timeline broke in 2022 and has never recovered. Companies that would have gone public are now staying private for 10-15 years or longer.
Employees, early investors, and even growth-stage funds needed liquidity somewhere. The secondary market filled the gap. What was once a niche activity — a few billion in annual volume, limited to executives and early investors selling in company-approved transactions — became a real functioning market with dedicated platforms, standardized pricing conventions, and institutional participants.
The scale is meaningful. Estimates from Forge and Nasdaq Private Market place 2024 secondary volume in private company shares at $60B+, up from roughly $12B in 2020. Every credible projection puts 2025 higher.
Three markets inside "the secondary market"
The term "secondary market" gets used as if it's a single thing. It's not. Three distinct markets operate under the same umbrella, each with different participants, dynamics, and pricing.
1. Employee tender offers
A tender offer is a company-organized liquidity event where the company facilitates share sales at a specific price. The company selects the buyer (typically an existing investor or a new institutional investor), sets the price, and offers employees the option to sell some percentage of their vested shares.
Tender offers are the most founder-friendly path because the company controls the pricing, the buyer, and the timing. They're the most employee-friendly path because the price is disclosed, the transaction is efficient, and the tax implications are clear.
Stripe ran a $6.5B tender offer in 2023 at a $65B valuation. Anthropic ran a large tender offer in 2024. Databricks, OpenAI, and Ramp have run similar programs. The pattern is now standard for late-stage private companies with strong balance sheets — a tender offer every 12-24 months to give employees ongoing liquidity.
Status: growing. Companies that don't offer tenders are increasingly at a recruiting disadvantage.
2. Broker-dealer platforms
Forge, EquityZen, Nasdaq Private Market, and a handful of smaller platforms match individual sellers with institutional buyers. Employees list their shares, buyers submit bids, transactions clear subject to company right of first refusal and transfer restrictions.
Faster than tender offers — a listing can clear in weeks — but subject to the company's cooperation. Many companies actively discourage or block secondary sales through their transfer restrictions, arguing that uncontrolled secondary trading creates cap table complexity and pricing volatility that affects future fundraising.
Pricing on broker-dealer platforms tends to be more volatile than tender offers because it reflects real supply-demand dynamics rather than company-negotiated pricing. Discounts to last preferred round are typically 20-40% but can range wider depending on demand.
Status: significant growth. Forge alone reports 10x+ transaction volume growth since 2020.
3. Direct secondary funds
Dedicated funds — Industry Ventures, StepStone Group, Setter Capital, Coller Capital — buy blocks of shares directly from employees, early investors, or growth-stage funds needing liquidity. Deal sizes range from millions to hundreds of millions.
This is the path of last resort for many sellers. Direct secondary funds are efficient at execution but tend to price aggressively — 30-50% discounts to last preferred round are common. The tradeoff: guaranteed execution, no bidding process, quick close.
Growing rapidly. Setter Capital estimates the direct secondary fund market at $100B+ in dry powder as of 2025, up from under $30B in 2020.
Status: institutional and increasingly important. Where the largest transactions happen.
Every private company share trades at two prices now: the last preferred round price on the cap table, and the secondary price in the market. The gap between them is the story.
The pricing story: discount vs. last round
The most consistent pattern across all three markets: secondary transactions price at meaningful discounts to the last preferred round.
Median secondary transactions in 2024 priced at 25-35% discounts to the last funding round. Some hot companies (a handful of AI names, Stripe, Databricks) traded closer to par or even at premiums. Many others traded at 40-60% discounts. The distribution is wider than in public markets and reflects real illiquidity risk plus significant information asymmetry between buyers and sellers.
Three factors drive the discount. First, illiquidity — buyers can't easily resell, and they demand compensation for that risk. Second, information asymmetry — buyers don't see internal financials that employees and insiders do. Third, transfer restrictions — many transactions require company approval, and the risk of a deal falling through gets priced in.
What this tells us about private valuations: the "$8B startup" is often being valued by the market at closer to $5.5B when someone tries to actually sell shares. The paper valuation and the tradeable valuation are diverging by significant amounts. This gap is the story of 2024-2025 in private markets.
What to do about it
Different guidance for each participant:
If you're an employee with vested shares in a private company:
- Check whether your company runs periodic tender offers. If they do, participate — it's almost always the best pricing available.
- If they don't, understand the discounts you'd face on broker-dealer platforms. A 30% discount may still be a good decision if the alternative is holding illiquid equity for another five years.
- Model your tax situation carefully. Secondary sales trigger real tax consequences. Talk to a CPA before selling.
- Don't sell everything. If you have conviction in the company, sell 25-50% for peace of mind and hold the rest for potential upside.
If you're a founder or executive:
- Consider running a tender offer if your company is Series C or later, growth-stage, and you have investor demand for secondary allocations. It's a retention tool that pays for itself.
- If you're blocking secondary transactions through transfer restrictions, understand the tradeoff. You're preventing employees from converting paper wealth into real money, which affects morale and retention.
- Talk to your investor base about their appetite for secondary purchases. Many funds actively want to expand ownership in strong portfolio companies through secondaries.
If you're an investor:
- The secondary market is genuinely one of the best asymmetric opportunities in venture right now. Institutional-quality companies trading at 25-40% discounts to last round is unusual.
- But information asymmetry is real. Do serious due diligence before buying secondaries. The seller almost always knows something the buyer doesn't.
- Understand transfer restriction risk. A deal that requires company approval can fall through weeks after you've committed capital.
The takeaway
The private company secondary market went from niche to mainstream in five years. It now processes tens of billions annually and functions as the primary liquidity mechanism for private company shareholders during the extended pre-IPO holding period.
For employees, it's an increasingly viable path to convert paper wealth into real money. For founders, it's a recruiting and retention tool that can be actively managed. For investors, it's a rapidly maturing asset class with genuine asymmetric opportunities.
Understanding this market isn't optional anymore. If you're building, holding equity in, or investing in private companies, secondary market dynamics are shaping your outcomes whether you engage with them directly or not.
Want to understand the mechanics of tender offers, employee liquidity, and secondary transactions in depth? Try the Exits & Liquidity topic pack on Gargiulo — scenarios covering tender offers, secondary sales, and the tax implications of both. Sterling has notes.
Sources: Forge Global 2024 State of the Private Market, Nasdaq Private Market, PitchBook, Setter Capital, Industry Ventures, and public disclosures from Stripe, Anthropic, and Databricks.