How Illiquidity Inflates Private Valuations
Dan Akivis, senior associate at Expansion VC, on selling secondary and managing LP relationships
The core point is that private valuations stay high partly because almost nobody has to trade on bad news in real time. In private markets, prices are usually set in a financing by one lead investor, not by a broad market of buyers and sellers. With limited disclosures, thin trading, and no practical way to short, weaker companies can keep marks that would likely fall fast if their stock traded more freely.
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This is most visible below the headline unicorn tier. In the interview, sub $500 million companies struggle to attract informed buyers at all, because management shares little and there is no regular market to discover price. That leaves round marks doing more work than actual trading demand.
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The comparison to public markets is really about mechanism, not prestige. Public stocks get repriced every day by many buyers and sellers, plus bearish investors. In private markets, repeated financing rounds and issuer controlled tenders create far fewer chances for negative views to show up in the price.
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The closest counterexample is Spotify. Before going public, it allowed recurring secondary trading and paired that with regular disclosures. That created a real pricing history. Most private companies avoid that process because better price discovery can also mean lower prices and more pressure to explain the business.
The market is heading toward more structured liquidity, better data, and more standardized trading venues. As that happens, private prices should start to look less like negotiated marks and more like market clearing prices. That will likely compress weaker names first, while rewarding companies willing to disclose more and build real investor trust earlier.