Venture Rebalancing Through Secondaries
James McGillicuddy, head of strategy at Carta, on building an issuer-centric platform and investing in secondaries
This marks a real shift in venture from all or nothing exits to portfolio rebalancing. Early investors are no longer waiting for an IPO or acquisition to touch liquidity. They are selling a slice once a company reaches later rounds, sending cash back to LPs, improving fund marks, and keeping the rest of the stake for future upside. That behavior becomes much more rational when private companies stay private for 10 plus years and secondaries become a regular tool instead of a one off exception.
-
The practical driver is fund math. Venture funds need distributions before a full exit. In the private markets report, the most useful pattern is selling 10 to 20% of a position, enough to return capital or support a new fundraise, while still holding the core stake. The same report notes this already happened with firms like USV in Twitter and early Uber investors in the SoftBank tender.
-
The old market structure made this clumsy. McGillicuddy describes sales happening mostly inside a big primary round or tender. If an investor skips that window and tries to sell months later, it can look like a negative signal. That is why recurring auctions matter, they turn one high pressure sell decision into several smaller chances to trim exposure over time.
-
Who benefits first is not evenly distributed. Tender offer data shows investors and founders tend to sell earlier and at better prices than employees. Across secondaries, investor sales dominate at lower valuation bands, while employee sales pick up later. So more regular post round liquidity is especially valuable for funds that got in at seed or Series A and are sitting on oversized positions.
The next step is a private market where selling 10 to 20% of a winner becomes normal fund management, not a rare side deal. If recurring liquidity keeps spreading, venture firms will manage positions more like public portfolio managers, and issuers that support structured secondaries will become more attractive to early investors who want both long duration upside and earlier cash returns.