Secondary markets, where existing shareholders sell stakes to new investors without a company going public or being acquired, have grown considerably in recent years.
This article looks at the key forces behind that growth, and what it means for founders, employees, and investors in the UK.
A generation ago, private secondary transactions were largely confined to institutional finance. They were complex, slow, and inaccessible to most people with equity in a private company. That has changed significantly.
Today, secondary markets are a practical consideration for a growing number of UK companies and their stakeholders.
A few interconnected trends explain the shift: companies are staying private for longer, the pool of people holding private equity has expanded, and the infrastructure to support secondary transactions has improved. Together, these have created both the demand and the means for a much more active market.
The most fundamental driver of secondary market growth is the lengthening timeline between founding and exit. Historically, successful startups might go public within five or six years. That timeline has roughly doubled.
According to research by the University of Florida, the median age of a company at IPO was 14 years in 2024, compared to an average of 9.5 years from 1980 to 2019. In 1999, during the dot-com boom, the median was just four years. The data, covering 44 years of IPOs, points to a sustained structural shift rather than a temporary blip.
The reasons companies give for staying private are well documented:
The result is that founders, early employees, and seed investors can find themselves holding significant paper value for a decade or more, with no obvious route to realising it.
Secondary markets exist to fill that gap. They allow equity to change hands on an ad hoc basis, without requiring a formal exit.
The scale of the secondary market's growth is reflected in the numbers.
The growth has been driven by activity on both sides of the market. Among sellers, investors and fund managers are increasingly using secondaries to manage portfolios and return capital to limited partners.
For those looking to buy, institutional investors are actively seeking exposure to high-growth private companies, and secondaries offer a route in without waiting for a primary fundraising round or diluting the company.
Alongside the structural shift in company timelines, there has been a change in how equity is perceived, particularly by employees.
Share schemes are now a standard part of compensation packages at UK startups and scaleups.
The number of companies running EMI schemes in particular has grown steadily, reflecting wider adoption of equity as a retention tool. However, the value of those options is contingent on a liquidity event that could be years away, or may never come in the expected form.
As a result, employees are increasingly interested in routes to partial liquidity before a formal exit.
Companies have begun to recognise that offering that pathway, through structured secondary transactions or tender offers, can make equity feel more tangible and help retain key people over the long term.
For founders, the dynamic is similar. Many are in the position of being equity-rich but cash-poor: the company is performing well, but the personal financial benefits remain locked up on paper.
A secondary sale can provide partial liquidity without requiring the founder to sell the company or take money out of the business.
The buy side of the secondary market has also evolved. Institutional investors, including private equity funds, pension funds, sovereign wealth funds, and family offices, have become more active participants in secondary transactions.
Part of the driver is fund lifecycle management.
Most institutional VC and PE funds operate on a 7-10 year cycle, but portfolio companies are increasingly staying private for 12-14 years.
Secondary transactions give fund managers a way to return capital to their limited partners on schedule, without forcing a premature exit from a company that may still have significant growth ahead of it.
There is also a growing appetite from buyers who want exposure to late-stage private companies at an earlier stage of their growth trajectory.
Secondary transactions allow them to acquire stakes without diluting the company, and without waiting for an IPO that may be years away.
One reason secondary market growth has accelerated is that the infrastructure to support it has improved.
A transaction that once required months of legal work and a network of specialist intermediaries is now more accessible, thanks to dedicated secondary platforms, standardised documentation, and clearer market norms around pricing and process.
In the UK specifically, the government's PISCES initiative (Private Intermittent Securities and Capital Exchange System) is designed to go further.
PISCES will create a regulated venue for private company share trading, with scheduled trading windows, lighter disclosure requirements, and no Stamp Duty or Stamp Duty Reserve Tax. Its aim is to give UK private companies a formal middle ground between staying fully private and pursuing a public listing.
As platforms and regulation mature, the friction that historically made secondary transactions slow and expensive is being reduced, which in turn is widening access beyond institutional investors.
Secondary transactions are not without complexity. Before pursuing one, there are several areas worth thinking through:
Secondary markets are growing because of the underlying conditions driving demand.
Longer private company timelines, wider equity ownership, and maturing institutional interest show no sign of reversing.
The $240 billion in global transaction volume recorded in 2025 reflects a market that has moved from niche to mainstream in a relatively short period.
For UK founders, employees, and investors, that means secondary markets are becoming an increasingly relevant part of the equity picture, not as a replacement for traditional exits, but as a practical option within a much longer journey.
Vestd helps UK businesses manage share schemes, cap tables, and secondary transactions. Book a call with our team to find out more.