71% of exit {dollars} in 2024 got here from a brand new avenue : secondaries.
Traditionally, IPOs and M&A have been the dominant exit paths for enterprise backed corporations. Some years IPOs dominate, different M&A dominates, however in 2024 secondaries captured the tremendous majority.
When an organization sells new shares to traders in change for {dollars}, they create new shares within the firm – major shares. When current shareholders promote their shares to new traders, we name this a secondary sale. An worker tender is a secondary sale provided to staff of the corporate. However secondary gross sales also can happen between one enterprise capitalist and one other enterprise capitalist.
The secondaries market is extremely opaque. So the figures gathered listed here are extraordinarily tough estimates however needs to be directionally right.
There was an enormous problem in liquidity since 2022 with the IPO market successfully silent, and M&A additionally stymied.
In response, capital markets reply in a approach they at all times do. They flood capital the place there’s alternative. And now the first path to liquidity inside enterprise are secondaries. That is based mostly on a Pitchbook evaluation of the general secondary market launched in Q1 of 2025.
This mirrors the personal fairness trade. I’ve written beforehand about how enterprise capital and personal fairness have parallel paths.
Right here I’m utilizing a barely totally different and narrower dataset, however you may see the introduced transactions which have been reported which might be exterior the scope of personal exchanges are roughly 20 to 30% inside each personal fairness and enterprise capital. During the last 10 years personal fairness has averaged about 28% secondaries as a type of liquidity.
As in personal fairness, we should always begin to anticipate secondaries to turn out to be a everlasting and important a part of enterprise capital liquidity for each staff of corporations and in addition traders.
With the goal ARR required to realize an IPO rising from $80m in 2008 to roughly $250m as we speak, secondaries will turn out to be a everlasting fixture in enterprise capital markets.
It’s not only a short-term anomaly, however a structural evolution in how enterprise capital will perform and finally evolve to look a bit extra like personal fairness.
