Issuer Trust Limits Early Secondaries
Dan Akivis, senior associate at Expansion VC, on selling secondary and managing LP relationships
The real bottleneck in early stage secondaries is not buyer demand, it is issuer trust. In subscale private companies, management often reads a shareholder sale as a negative signal or an avoidable distraction, because they do not yet see secondary as a controlled financing tool. That matters because the company decides who gets on the cap table, what information gets shared, and how much work the transaction creates internally.
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Later stage companies are usually more open because secondary already has a clear job there. It can refresh the cap table, let early investors sell without dilution, and help set a market price before an IPO or direct listing. Earlier companies have not yet built that mental model.
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Management discomfort is usually tied to two concrete fears. First, admin burden, legal review, cap table changes, and 409A effects. Second, information asymmetry, because buyers want updated numbers, while the company has no reason to educate off cycle investors for one seller's benefit.
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The market has evolved toward issuer controlled formats for exactly this reason. Platforms and SPV structures now try to keep the company in control of who buys, how much is sold, and how messy the process gets, instead of repeating the old open market chaos that made founders wary in the first place.
The next step is a shift from ad hoc approvals to repeatable liquidity policies. As more private companies stay private longer, teams will treat secondary less like a one off exception and more like planned infrastructure for investor turnover, employee liquidity, and price discovery. The winners will be the companies that make it easy to trade without losing control.