Market Insight Update: Eclectic Nature of Secondary Market Participants

Given the vast set of opportunities to buy or sell securities within the secondary market, there are a myriad of participants that are present on both the buy side and the sell side.

Buy Side participants are listed below. They seek exposure to late stage growth investments.

Institutional growth stage VC firms / hedge funds - VC firms with a mandate to invest in late stage growth name via primary rounds. Given the size of these later stage round (Series C+), they tend to have $100M+ AUM. They participate in the secondary market by doubling down on their current portfolio company at discounts to lower their cost basis.

UHNWI / Family offices – Successful entrepreneurs that have a penchant for investing in the private securities sector. When they outsource their portfolio management to a lean team of trusted individuals, the UHNWI holding are encompassed and monitored by a family office unit.

Pure play secondary funds - VC firms with a mandate to invest in late stage growth name via secondary rounds. Given that they would need to price these late stage names accurately, these firms need access to management and dataroom to arrive at a bid price in more esoteric secondary names.

SPV Managers – Syndicates lead by UHNWI that pool capital from their vast network of LPs. Setting up the fund and aggregating capital commitments can take a few weeks. They prioritize momentum and brand market names that would resonate with their LP base.

Sell Side participants are listed below. These sellers would only explore the secondary market if their cost basis was quite low relative to last round and they want to experience returns.

Employees – employees are granted common shares as a result of the time that they have allocated in the company. Early and tenured employees tend to hold the majority of common shares.

Early Stage Investors- VC firms with a mandate to invest in early stage name via preferred primary rounds.

Angel Investors and SPV Managers – UHNWI and fund managers that have access to early preferred rounds via their network.

Utilize an experienced broker dealer firm like RainMaker Securities to engage with qualified counterparties on the buy side and sell side.