Long-only venture limits price discovery
Dan Akivis, senior associate at Expansion VC, on selling secondary and managing LP relationships
The core problem is that private venture prices are often negotiation outcomes, not market clearing prices. In practice, one lead investor names a price in a round, the company limits disclosure, and there is almost no natural mechanism for skeptics to push price down. That leaves buyers relying on sparse information, broker color, and round marks, which helps explain why secondary discounts and sudden post IPO resets are so common.
-
Without short sellers, private markets mostly hear from believers. That matters because a public stock gets pressure from both buyers and skeptics every day, while a startup share may get repriced only when a new round happens, often every 1 to 2 years.
-
The practical result is stale pricing. Secondary buyers often anchor to the last preferred round and then demand a blanket discount because they do not have current financials or regular company updates. That discount is a crude substitute for real price discovery.
-
More regular secondary trading can tighten that gap. Cases like Spotify showed that repeated private transactions plus recurring disclosures created a usable price history before listing, instead of forcing the public market to discover all the bad news and good news at once.
Where this heads is toward more structured private liquidity, more recurring disclosure, and a clearer split between companies that welcome market feedback and companies that avoid it. As that infrastructure improves, venture pricing should get less flattering in the short run and more useful in the long run, for employees, funds, and future investors.