Latest / The Startup Exit Podcast with Fexingo: IPOs, Acquisitions, and Founder Liquidity Events / How Private Secondaries Became a Liquidity Lifeline for Founders
Transcript
- Lucas: Alright, let's talk about the exit that doesn't make headlines — the private secondary sale. Luna: You mean the kind where founders and early employees sell shares before the company ever goes public? Lucas: Exactly. And it's becoming a bigger deal every quarter. According to Forge Global's latest data, the total volume of private secondary transactions hit roughly $12 billion in Q1 2026 alone. That's up about 30 percent year-over-year. Luna: Thirty percent — that's significant. And it's not just small startups. We're seeing massive rounds for companies like Stripe and SpaceX, where early investors have been cashing out through tender offers. Lucas: Right. Stripe is the poster child. The company hasn't done an IPO, but they've run multiple secondary liquidity events — the last one reportedly valued the company at $65 billion. That's allowed employees and early backers to take money off the table without waiting for a public listing that may never come. Luna: And for founders, it's a way to de-risk personally. You've been building for years, your net worth is tied up in one stock — selling a slice gives you breathing room. Lucas: Exactly. The classic advice used to be 'hold until IPO' — but now the median time to IPO is over 11 years. That's a long time to have zero liquidity. So secondary markets have evolved to fill that gap. Luna: And the infrastructure has matured too. Platforms like Forge Global and Nasdaq Private Market now offer institutional-grade matching and pricing. It's not just 'call your network and hope someone buys' anymore. Lucas: Right. There's even a benchmark index now — the Forge Private Market Index, which tracks the performance of private companies. It gives investors a sense of how private valuations are moving in real time. Luna: That's a huge shift. Let's look at a specific sector — biotech. ARKG, the ARK Genomic Revolution ETF, has surged 9.1 percent in the last five days. That kind of rally often signals that public biotech investors are feeling bullish, which can trickle down to private company valuations and liquidity. Lucas: Good catch. If the public comps are up, private sellers can demand higher prices in secondary negotiations. And we've seen a wave of biotech secondaries this year, especially for companies that are close to FDA milestones but not yet profitable. Luna: It's a classic risk-reward trade-off. Sell now at a known price, or hold for a potentially higher IPO price — with the risk it never materializes. Lucas: Which brings us to the mechanics. Most secondary transactions happen through tender offers — the company itself orchestrates a window where employees and early investors can sell a set number of shares to a pool of institutional buyers. Luna: Right. And the company typically sets the price — often based on the most recent funding round valuation. But sometimes they'll adjust it based on market conditions. Lucas: And there are direct secondary sales too — where an individual shareholder finds a buyer independently. But that's less common because it can get messy with corporate approvals and right of first refusal. Luna: By the way, if you're finding these conversations useful for what you're building or running — we keep this show ad-free thanks to listener support. If you'd like to help, you can buy us a coffee at buy me a coffee dot com slash fexingo. No pressure, just appreciate you being here. Lucas: Yeah, we really do. There's something nice about knowing the people listening are the ones making it happen. Anyway — back to secondaries. Lucas: One thing that's changing is the role of the company itself. More startups are proactively creating formal secondary programs — not just one-off events, but recurring windows every six or twelve months. Luna: That makes sense from an employee retention standpoint. If people know they'll have a chance to sell, they're less likely to jump ship for a public company where they can get liquidity immediately. Lucas: Exactly. And for the company, it's a way to manage their cap table. They can decide which investors get to participate, and they can cap the total amount sold to avoid diluting control too much. Luna: But it's not all upside. One risk is that frequent secondary sales can create downward pressure on the company's valuation. If the secondary price is lower than the last primary round, that sends a signal to the market. Lucas: True — and that's called a 'down round' in the secondary market, even if the company itself hasn't raised new money. But buyers are sophisticated. They know that a secondary discount might just reflect a risk premium, not fundamental weakness. Luna: So what's the takeaway for a founder today? Should they start planning a secondary liquidity event? Lucas: I'd say — talk to your board and your investors early. If you think an IPO is more than three years out, a secondary program could be a strong retention tool. But only if the company's fundamentals are solid and you can get a fair price. Luna: And the data suggests the market is there. With volumes growing 30 percent year-over-year, there's clearly demand from institutional investors wanting exposure to high-growth private companies before they go public. Lucas: Right — and that demand isn't going away. We're seeing more dedicated secondary funds, and even traditional venture firms are setting up secondaries vehicles. It's becoming a core part of the ecosystem. Luna: I wonder if we'll reach a point where the private market is so liquid that the IPO becomes less of a milestone and more of an option. Lucas: That's the big question. Some companies might choose to stay private indefinitely — like Cargill or Koch Industries have for decades. But for tech companies, the IPO still offers brand credibility, currency for acquisitions, and a wider investor base. Luna: So secondaries are a tool, not a replacement. But they're a tool that's becoming essential for founders and employees who need liquidity before the big event. Lucas: Exactly. And as the market matures, we're likely to see more standardized processes, better data, and maybe even a private-company stock exchange. It's a space worth watching. Luna: For now, if you're a founder with equity, it's worth understanding your options. The days of 'wait for the IPO' are over.