Scarcity premium in private markets
Ani Banerjee, co-founder of Andromeda Group, on secondary diligence and companies staying private
Scarcity premium is the extra price investors pay because the best late stage private companies are hard to access, not just because their businesses are good. In practice, a company can have strong recurring revenue and still trade even richer because there are few sellers, founders tightly control the cap table, and many investors are competing for small secondary blocks. That makes access and network as important as fundamental analysis in private software investing.
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In this interview, the investing playbook is to stay inside sectors where underlying business quality can be judged, then concentrate on the rare companies emerging as category winners. The premium comes from getting into those names before liquidity becomes broad and price discovery becomes more efficient.
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Secondary pricing is shaped by scarcity in a very literal way. Shares may trade at a 20% discount to the last round, at no discount, or even at a premium when the business is strong and the available block is rare. Price depends on who is selling, what share class is offered, and how much founder approval matters.
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This same scarcity shows up in tender offers and private liquidity programs. Closed, issuer controlled processes often limit access and keep true price discovery weak, which is why underpricing and low participation can persist. More structured marketplaces aim to widen access, but companies still ration who gets onto the cap table.
Over time, scarcity premium should become a defining feature of the best private companies, not a temporary quirk. As more companies stay private longer and offer only controlled pockets of liquidity, investors with trusted access to founder led winners will keep capturing the biggest advantage, while broad market access will remain delayed until companies choose to open up trading.