Let's shine some light on the murky secondary private market for tech startups.
Quick definitions up top:
The secondary private market is a stock market, but for private companies. Except instead of a 2-click experience in your Robinhood app, it's a complex set of negotiations about illiquid assets. Exciting!
For simplicity, this private market is further divided into block trades (individuals or small groups trying to sell private stock options) and company-sponsored tender offers. In both cases, the goal is to give current option-holders some liquidity (ie real cash) in exchange for their equity in a private company.
Read through all the data Carta has on secondaries here: https://lnkd.in/dB49qBz9
So how was 2022? Like many things, it's a tale of two halves.
Carta saw record levels of liquidity events in H1 2022 and steep declines in H2. Why?
As valuations fell in public and private, the gap between buyer and seller expectations grew.
Smaller tender offers became more common while mega events tailed off.
From Kevin Dowd's piece: "The main cause of the recent lull in the secondary market is a lack of agreement about how to value private companies"
"...For now, most companies are still prioritizing things like profitability and conserving balance sheet capital over the prospect of providing liquidity."
Perhaps H2 2023 will see the return of robust private market liquidity. And hey, it's not just us - this idea of liquidity is in the air (see all of these Stripe headlines: https://lnkd.in/dDwQTEhg)
Big shoutout to Emiley Jellie, Jason Raziano, Crystal Shen, Ryan Durkin, Jackie (Falk) Ammon, James Conroy, CFA, and the whole Carta Capital Markets team for their great work!
#cartadata #startups #liquidity
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