Why it happens · New investors
Buying in without a primary round
Not every use case is about selling. For an investor who missed a company's early rounds — or who wants exposure to a company that has stopped raising primary capital at an accessible size — buying an existing shareholder's stake through a secondary transaction is often the only way in. This is the demand side that makes every use case above possible.
Worked example
A worked example of buying in via secondary (illustrative figures):
- A growth investor wants $5 million of exposure to a company that hasn't raised primary capital in over a year and shows no sign of running a new round soon — so there's no primary allocation to buy into.
- The investor instead buys a $5 million block of existing shares directly from a departing early employee, at a 10% discount to the company's last primary round price — an effective entry basis of $4.5 million for what would cost $5 million in a hypothetical new primary round.
- In exchange for that discount, the buyer accepts real trade-offs: no board seat, no negotiated information rights, and dependence on the company's next liquidity event (another round, a tender, or an eventual IPO or acquisition) for their own exit — the same asymmetry described in how a deal works.
- Multiply this transaction across dozens of buyers and sellers and you get the demand side of the entire secondary market — see the buyer & fund directory for the institutions that do this at scale.
See every reason a secondary sale happens, or go back tohow a deal actually works step by step.