A few weeks ago we published our inaugural guide to VC secondaries buyers in an attempt to summarize some of the biggest players in the burgeoning landscape of venture capital secondaries. In the accompanying story multiple sources explained how, due to a variety of reasons, estimating the actual size of the VC secondaries market is difficult, but that it likely falls somewhere between $100 billion and $150 billion.
Alan Vaksman, founding partner of Launchbay Capital in London, believes that the total venture secondaries market is likely worth “around $120 billion to $140 billion” right now. He also explained that in direct secondaries, or direct sales of investor, founder or employee shares in start-ups to another investor, there is currently “about $30 billion to $40 billion of actionable supply,” and of that portion there is “about $3 billion to $5 billion [that] actually changes hands every year.”
Vaksman’s estimate of yearly transaction value seems to be accurate according to Evercore’s H1 2024 Secondary Market Review.
The review found that through the first half of the year there was a record $72 billion of transaction volume across all secondaries transactions globally. Of that amount roughly $41 billion was in LP-led transactions, while $31 billion was in GP-led transactions.
Of the GP-led transactions that occurred, approximately $4.34 billion in transaction volume was ascribed to venture and growth secondaries deals. Roughly 14 percent of all GP-led transactions were made up of preferred equity and tender offers, leaving 86 percent, or $3.73 billion, that has changed hands through H1 of this year. That suggests the upper end of Vaksman’s $3 billion-$5 billion estimate may be closer to the true value that direct venture secondaries transactions will reach by the end of the year.
The record total for H1 2024 matches the total for all of 2018, and the review explains that higher volumes are typically seen in the second half of the year, suggesting that in 2024 the transaction volume of the global secondaries market will likely reach a value even above the current record of $134 billion seen in 2021.
All of this is good news for the relatively small circle of dedicated venture secondaries investors, which saw multiple new entrants in the past few years.
Among the newcomers are Ballast Equity Partners, which held a first close on its debut fund at $78 million in December last year; E1 Ventures, which closed on $20 million across “up to 10” single-asset special purpose vehicles in 2023, according to founder and general partner Ana Levine; and Pinegrove Capital Partners, which is currently raising its debut fund and has at least $1 billion in assets under management.
Evercore’s review found that secondaries dry powder has nearly doubled from 2019, reaching approximately $189 billion through the end of H1 2024, largely driven by existing investors raising new pools of capital. While the report does not break out individual asset class numbers for this total, Venture Capital Journal research estimates that nearly $6.5 billion has been raised for dedicated venture secondaries funds since the start of H2 2023.
StepStone Group remains the largest dedicated venture secondaries investor in the market, closing on a market-leading $3.3 billion for its sixth flagship venture secondaries fund in June, easily beating its $2.6 billion target. Longtime venture secondaries investor Industry Ventures closed on $1.45 billion for its 10th flagship vehicle in late 2023, or 70 percent more than its predecessor.
VCJ will continue to cover the emerging market of venture capital secondaries as it develops and new firms enter the arena. Hans Swildens, founder and chief executive officer of Industry Ventures, certainly thinks this is just the beginning.
“I think that this is a growth area; it has been for 25 years, so at least I’ve been right so far,” he explained. “I think fundamentally it’s got good drivers in terms of how it’ll keep growing, and then how the funds are using the market is going to become a tool of all of their partnerships instead of one-off transactions, so that means the market will be systematically growing with repeat dealflow.”