Secondaries Normalize Pre-IPO Liquidity
Andrea Walne, GP at Manhattan Venture Partners, on getting on the cap table
The key dynamic is that early venture money often becomes a forced seller long before it stops believing in the company. Small funds and angel investors need realized cash, not just rising paper marks, because distributions help them show IRR, return money to LPs, and raise the next fund. In practice, that makes mature winners a source of secondary supply, especially in early preferred and other long held positions.
-
Secondary sales solve a cap table timing problem. As companies stay private longer, early investors and former employees pile up on the cap table, even when their capital needs and time horizons no longer match the company’s next phase. Selling those stakes lets companies add newer strategic investors without issuing more shares.
-
The seller is often not exiting fully. A common pattern is taking some chips off the table, then holding the rest. That gives an early fund enough cash to prove returns and support fundraising, while keeping exposure to further upside in the same winner.
-
This is why private secondaries skew toward issuer approved, relationship driven deals rather than open market trading. Companies want control over who replaces the seller, and buyers who can work with management, handle disclosures, and reduce admin burden are more likely to win access.
As private companies keep delaying IPOs, this pressure should intensify. The likely result is a more regular rhythm of partial sell downs by early funds, with secondaries becoming a standard portfolio management tool rather than a one time exception, and a bigger part of how companies refresh their cap tables before going public.