Lead Investors Drive Private Valuations
Dan Akivis, senior associate at Expansion VC, on selling secondary and managing LP relationships
Private market prices are often negotiation outputs, not market clearing prices. In practice, one lead investor sets the terms for a new round, existing insiders decide whether to accept them, and the resulting price becomes the headline valuation for the whole company. That works when capital is abundant and information is tightly held, but it also means pricing can drift far from what a broader set of buyers would pay in a real two way market with continuous trading and more disclosure.
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In private companies, stock is usually repriced only when a new round closes. That is very different from public markets, where many buyers and sellers update the price every day. The result is step function jumps in valuation rather than constant price discovery.
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Secondary buyers often compensate for weak information by applying a blanket discount to the last round, sometimes without strong company specific diligence. That is why off cycle trading can signal demand, but still fail to produce a price that reflects the company's actual operating momentum.
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The market tends to mature when issuers allow structured liquidity and share more information. Spotify is the clean example. Years of controlled secondary trading and regular disclosure created a real pricing history before its direct listing, which made the eventual public price feel earned rather than invented.
The next phase is a private market with more repeat trading, fewer ad hoc middlemen, and more issuer sanctioned disclosure. As that happens, valuation setting shifts from a single investor naming a number toward a broader market process, and companies gain a more credible way to reward employees, refresh the cap table, and prepare for going public.