VC Position Sales Enable LP Liquidity
Atish Davda, CEO of EquityZen, on the biggest bottleneck in the secondary markets
This is why late stage secondaries stopped being just an employee liquidity product and became a fund management necessity. When IPOs and M&A slow down, a venture firm cannot hand cash back to its LPs unless it sells part of a winner, either through a company run tender or an off cycle secondary. That turns private stock into the release valve for the whole venture chain, not just for employees with paper wealth.
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For a typical VC, LPs do not get paid from paper markups. They get paid when the fund distributes cash. That is why early funds often sell part of a position, not all of it, so they can return capital, show realized gains, and still keep upside if the company keeps compounding.
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The bottleneck is practical, not conceptual. Outside a primary round or formal tender, buyers often lack fresh company data, issuers do not want the admin work, and smaller funds struggle to find enough informed demand at a fair price. That is why secondaries cluster in better known late stage names.
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This also explains why platforms split into two camps. Marketplace models like EquityZen and Forge help move smaller blocks for employees and smaller holders, while issuer led tools like Nasdaq Private Market and Carta are built for controlled programs where a company can decide who buys, how much sells, and when it happens.
The next step is a more regular liquidity cadence, where mature private companies treat tenders and secondaries as part of normal capital formation. As that becomes standard, venture funds will manage DPI earlier, LPs will wait less for cash, and private markets will look less like a holding pen and more like a functioning exit channel.