Secondary Marketplaces & Brokers: $25B in 2010 → >$130B Market Today
The secondary market has ballooned over the last 15 years, which has led to an enormous number of entrants building software and marketplaces to facilitate secondary transactions.
According to a report from Industry Ventures:
- The global addressable market ballooned from $25B (2010) to an estimated $100B+ at peak.
- Since the inception of Industry Ventures (2000), the VC asset class has grown over 10x
- Traditional VC firms raised over $1.7 trillion over the last 10 years, compared to just $406 million over the prior 10 years.
- From 2016-2021, 12k+ new venture funds came into existence, More than 2x the 6.1k funds formed across the prior 6 years.
Given this recent VC boom, the demand & need for secondaries on both sides has exploded!
And secondary marketplaces have emerged!
Some notable secondary marketplace platforms include Hiive, Zanbato, Forge Global, EquityZen, Setter Capital Inc., among others. There are differences in how these marketplaces operate.
Hiive has created its own website marketplace where buyers/sellers can place bids and asks for companies and Hiive will facilitate those transactions for a fee.
Other marketplaces like EquityZen may sign a supply of an allocation and then list those allocations on their marketplace to be filled on a first come first serve basis.
"A big issue in the secondary market is trust— participants seldom know if an opportunity presented to them by a broker is in fact real, or if the broker is fishing for a buy or sell order. Our marketplace tackles this problem by enabling users to bid, negotiate, message and ultimately match on a trade, directly with each other. Once they agree on a deal, Hiive communicates with the issuer for approval, and finally executes the transaction."
- Sim Desai (CEO, Hiive)
The Good:
1) Easy Access → Brokers & secondary marketplaces have done a good job of aggregating supply & demand in the secondary ecosystem, making it easier for SPV GPs, Funds and large HNW individuals to access high in demand companies.
2) Reducing Friction → These marketplaces also typically work with the IR/C-Suite at the startups listed on their platform to coordinate and handle transactions, providing a higher level of assurance that the secondary transaction will go through and reduce pain in the process.
3) Market Knowledge → These platforms usually have difficult to access info to ensure a smoother transaction such as the ROFR price (right of first refusal - contractual right that gives a party the option to enter into a transaction before anyone else can), any restrictions/requirements on secondary sales, among other key info to enable transactions.
The Bad are documented in the comments.
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