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.

The secondary market is no longer just for LPs seeking early liquidity. With trillions in unrealized private assets, it's becoming a primary way for investors to gain exposure, akin to buying a public stock. One can now buy into established private companies directly, not just new funds.

Private equity and venture capital funds create an illusion of stability by avoiding daily mark-to-market pricing. This "laundering of volatility" is a core reason companies stay private longer. It reveals a key, if artificial, benefit of private markets that new technologies like tokenization could disrupt.

Today’s private markets are undergoing a fundamental market structure change, much like public equities did with decimalization and ETFs. This suggests the current illiquidity and complexity are features of a maturing market, not just a temporary downturn.

While retail investors may demand daily pricing for private assets, this eliminates the "hidden benefit" of illiquidity that historically forced a long-term perspective. Constant valuation updates could encourage emotional, short-term trading, negating a core advantage of the asset class: staying the course.

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.

Samir Kaji of Allocate highlights a massive shift in capital markets: the number of private asset managers has grown tenfold in 15 years. This proliferation, combined with companies staying private longer, creates a huge operational challenge and a market opportunity for platforms that bridge funds and wealth advisors.

Historically, asset classes were siloed for convenience because modeling illiquid private assets was difficult. Technology is changing this by providing greater transparency and analytic capabilities for private markets, turning the binary public/private distinction into a continuous spectrum of liquidity and disclosure.

The trend of companies staying private longer and raising huge late-stage rounds isn't just about VC exuberance. It's a direct consequence of a series of regulations (like Sarbanes-Oxley) that made going public extremely costly and onerous. As a result, the private capital markets evolved to fill the gap, fundamentally changing venture capital.