Creating liquidity in private markets is not about better tech like blockchain. The core challenge is one of market structure: finding a buyer when everyone wants to sell. Without a mechanism to provide a capital backstop during liquidity shocks, technology alone cannot create a functional secondary market.
Related Insights
The traditional IPO exit is being replaced by a perpetual secondary market for elite private companies. This new paradigm provides liquidity for investors and employees without the high costs and regulatory burdens of going public. This shift fundamentally alters the venture capital lifecycle, enabling longer private holding periods.
The secondary market faces a potential capital shortage. The total available dry powder (~$200B) nearly equals the transaction volume expected this year alone. This tight supply-demand balance suggests a favorable risk-reward for new capital entering the space.
Success in late-stage venture resembles trading more than traditional investing—it's about buying and selling on momentum. However, this "new public market" has a critical flaw: while liquidity exists on the way up, it vanishes on the downside, making it impossible to execute a true trading strategy when a correction occurs.
The greatest systemic threat from the booming private credit market isn't excessive leverage but its heavy concentration in technology companies. A significant drop in tech enterprise value multiples could trigger a widespread event, as tech constitutes roughly half of private credit portfolios.
Private equity's reliance on terminal value for returns has created a liquidity crunch for LPs in the current high-rate environment. This has directly spurred demand for fund finance solutions—like NAV lending and GP structured transactions—to generate liquidity and support future fundraising.
Vested works directly with employees because startups find small, one-off secondary transactions burdensome due to legal fees and cap table complexity. However, this dynamic inverts at scale. Once Vested facilitates millions in transactions for a single company's stock, the startup has a strong incentive to partner on a formal liquidity program.
Serving thousands of individual investors requires a huge investment in "nuts and bolts" infrastructure for administration, processing, and reporting. This operational complexity and cost, not client-facing apps, is the primary hurdle for GPs entering the retail space, moving from analog processes to complex digital systems.
Though a small portion of the market's NAV, retail investor participation is growing at 50% annually. This new, consistent capital flow is a significant structural change, increasing overall market liquidity and enabling more transactions.
The primary risk in private markets isn't necessarily financial loss, but rather informational disadvantage ('opacity') and the inability to pivot quickly ('illiquidity'). In contrast, public markets' main risk is short-term price volatility that can impact performance metrics. This highlights that each market type requires a fundamentally different risk management approach.
