Ventuals

What Are Secondary Markets?

Learn what secondary markets are, how they work for private company shares, and how they compare to newer alternatives for pre-IPO exposure.

By Emily Hsia·Updated

Two hands exchanging a stock certificate — illustrating how secondary markets work

A secondary market is where investors buy and sell securities from each other, rather than from the company that originally issued them. When you buy shares of Apple on the NYSE, you are buying from another investor — not from Apple. That is a secondary market transaction.

In private markets, secondaries work the same way in principle: an existing shareholder — usually an employee, early investor, or fund — sells their stake to a new buyer. But in practice, private secondary markets are far more restricted, more expensive, and harder to access than their public counterparts.

What is a secondary market?

Every security starts on a primary market — the first time it is sold. When a startup raises a Series B, the new shares it issues to investors are primary market transactions. When a company IPOs and sells new shares to the public for the first time, that is also a primary market event.

Everything after that first sale happens on the secondary market. The company itself does not receive any money from secondary transactions. Instead, one investor sells to another at whatever price the two parties agree on.

In public markets, secondary trading is constant and transparent. Exchanges like the NYSE and Nasdaq exist specifically to make it easy. Prices are visible, trades settle in seconds, and anyone with a brokerage account can participate.

In private markets, secondary trading is the opposite — infrequent, opaque, and restricted. There is no exchange. Prices are negotiated privately. And most transactions require the company's explicit approval before they can close.

How secondary markets work for private company shares

When an employee at a late-stage startup wants to sell some of their vested shares, or when an early investor wants to cash out part of their position before an IPO, they turn to the private secondary market.

Here is how a typical transaction works:

  1. A seller decides to offer shares. This is usually an employee with vested stock options or an early-stage investor looking for partial liquidity.
  2. A buyer is found. This happens through specialized platforms like Forge, EquityZen, or Nasdaq Private Market — or through private brokers and direct introductions.
  3. Price is negotiated. Unlike public markets, there is no live order book. Buyer and seller agree on a price, often benchmarked to the company's most recent funding round or a third-party valuation.
  4. The company must approve the transfer. Most private companies have a right of first refusal (ROFR), meaning the company itself (or existing investors) can choose to buy the shares instead. The company can also block the sale entirely.
  5. The transaction closes. If approved, the shares transfer to the new buyer. This process can take weeks to months.
Primary marketSecondary market
Who sellsThe company itselfExisting shareholders
Who gets the moneyThe companyThe selling shareholder
When it happensFunding rounds, IPOsAnytime (with approval)
Price discoverySet by the company and lead investorsNegotiated between buyer and seller
Company involvementDirect — company issues new sharesIndirect — company approves the transfer

Who can participate in private secondary markets

Private secondary markets are not open to everyone. In most cases, buyers must be accredited investors — meaning they meet specific income or net worth thresholds set by the SEC.

Beyond accreditation, there are practical barriers:

  • High minimums. Most secondary transactions require a minimum investment of $10,000 to $50,000 or more. Some platforms have worked to lower this, but the floor remains high compared to public markets.
  • Platform access. Not all platforms accept all investors, and some shares are only available through specific brokers or marketplaces.
  • Limited supply. Not every private company has active secondary trading. Shares of well-known companies like SpaceX or Anthropic may trade actively, while smaller startups may have no secondary market at all.

These barriers are a major reason why most people cannot buy private company stock through traditional channels.

Why secondary markets have grown

Private secondary markets have expanded significantly over the past decade, driven by one simple fact: companies are staying private much longer.

In the early 2000s, the median time from founding to IPO was about four years. Today, many high-profile companies remain private for 10 to 15 years or more. SpaceX was founded in 2002 and is only now approaching a public listing more than two decades later.

This extended timeline creates pressure from two directions:

  • Employees who hold equity want the ability to convert some of that paper wealth into cash — especially if they have been waiting years for a liquidity event that keeps getting delayed.
  • Early investors in venture funds may want to rebalance their portfolios or return capital to their own investors before a fund's natural lifecycle ends.

The result is a growing ecosystem of platforms, brokers, and structured products designed to facilitate private share trading. The global secondary market for private equity reached record volumes in recent years, reflecting both increased demand and improved infrastructure.

Secondary markets vs. other ways to get pre-IPO exposure

Buying shares on a secondary market is one way to get exposure to a private company's value — but it is not the only way. For investors who do not meet accreditation requirements or who want more flexibility, newer alternatives now exist.

Secondary sharesPerpetual futuresEquity crowdfunding
What you getActual ownership of sharesPrice exposure (no ownership)Equity stake (small)
Accreditation requiredYes (usually)NoNo
Typical minimum$10,000–$50,000+As low as $10As low as $100
LiquidityLow — weeks to monthsHigh — exit anytimeVery low — years
Company approval neededYes (ROFR)NoNo
Available for most companiesNo — limited supplyGrowing selectionLimited to Reg CF issuers

Secondary shares give you real ownership, but come with the highest barriers. Perpetual futures — offered by platforms like Ventuals — give you price exposure without ownership, with lower minimums and no accreditation requirement. Equity crowdfunding under Reg CF gives you an actual equity stake, but with very limited liquidity and a narrow universe of companies.

For a deeper comparison of these paths, see our guide on investing in unicorns as a retail investor.

The bottom line

Secondary markets are where private company shares change hands between investors — and they have become an increasingly important part of the private investing landscape. For accredited investors with the capital and patience for the process, they offer a real path to ownership in companies before they go public.

But they are not the only option anymore. For investors who want exposure to private company valuations without the friction, minimums, and accreditation requirements of traditional secondaries, newer structures like perpetual futures offer a more accessible alternative.

Ready to get exposure to pre-IPO companies? Start on Ventuals

This article is for general informational purposes only and is not financial advice. It is not a recommendation or offer to buy, sell, or invest in any security, asset, or product. Always do your own research and consult qualified professional advisors before making investment decisions.

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