Pod Insights Equity Podcast The rise of retail investors in secondaries, and why delayed IPOs will become the norm About this episode Retail investors are increasingly shaping the secondary market. In Q4 2024, platforms like EquityZen reported that 86% of total transaction volume came from retail participants—an eye-catching shift as tools like Forge and EquityZen promise broader access to private shares.
But does more access mean more opportunity, or more risk? Today on Equity, Rebecca Bellan is joined by Jared Carmel of Manhattan Venture Partners to dig into what he calls a “once-in-a-generation opportunity” in secondaries, and why he sees this market as a “pressure relief valve” that could keep startups private well past their startup years.
Listen to the full episode to hear more about:
Why a sluggish IPO market is pushing more action into secondaries
How this creates a flywheel for venture capital
And why Jared thinks robust secondary markets will delay (or eliminate) the need for IPOs altogether
Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Wednesday and Friday.
Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes here.
Credits: Equity is produced by Theresa Loconsolo with editing by Kell. We’d also like to thank TechCrunch’s audience development team. Thank you so much for listening, and we'll talk to you next time.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Anthony Ha? This episode of Equity is brought to you by Schneider Electric. Schneider Electric, advancing energy tech.
0:17 Rebecca Bellan? Hello and welcome back to Equity, TechCrunch's flagship podcast about the business of startups. I'm Rebecca Beland, and this is the episode where we bring on industry experts to help us explore a trend in the tech world and dive deep. Today, we're talking about secondaries. And according to private stock trading platform Equity Zen, retail investor activity in the secondary market made up 86% of total transaction volume in the fourth quarter of last year. As retail investing platforms and tools like Equity Zen and Forge Global aim to, quote, "democratize access to private company opportunities," we're asking, is this the beginning of a new era for retail investors? Or are we underestimating how complex and risky these markets really are? Today, to talk about that trend, we're joined by secondary market OG Jared Carmel. He's a managing and general partner at Manhattan Venture Partners.
1:01 Rebecca Bellan? We also talked about why a slow IPO market leads to a boost in secondaries, how this creates a flywheel effect in the world of venture capital, and why Jared predicts that we're going to see way fewer IPOs in the future as a robust secondary market makes it easier for companies to stay private.
1:19 Rebecca Bellan? Jared, welcome to the show. Thanks so much for coming to join us.
1:22 Speaker 02 Thank you for having me. Glad to be here.
1:24 Rebecca Bellan? So you are at Manhattan Venture Partners, and you have been one of the driving forces behind institutionalizing secondaries.
1:32 Speaker 02 Yes.
1:32 Rebecca Bellan? Why don't you give us a little bit of background as to why you're the perfect person to talk to about secondary market trends?
1:38 Speaker 02 So, like you said, I'm Jared Carmel. I'm one of the founders of MVP, and I'm one of the GPs of our All-Star Fund. Who am I? Well, I guess I'm the guy who's been around the secondary market since 2009, saw the potential when it was sort of a speck on the radar, a tiny club of VCs just buying and selling shares in companies like Facebook and Twitter. And then a few over the counter sort of trading platforms started to bubble up. And I said that this thing has the potential to be a real asset class. But it's a bit of a mess, and it needs to really be legitimized. That's me, not really afraid to dive into the chaos, build something. And after trying myself to develop a secondary market technology platform to really democratize the space that was called Citizen VC, we realized that the inefficiencies were not a glitch to be fixed by
2:22 Speaker 02 technology. It was really a competitive moat. So in 2014, we founded MVP to institutionalize the asset class. We had this goal of making it as solid as the LP secondary market, which has been around for decades. And really, we saw it as an evolution and we've been helping guide it ever since.
2:37 Rebecca Bellan? So I want to take a step back. I mean, I'm sure most of our listeners are very familiar with the secondary markets, but it seems like there's a rise of transactions in the secondaries lately, especially with retail investors coming in. Companies are taking longer to IPO. That means there's a drought of liquidity. You're always hoping for a unicorn, but it's taking like, what, 12 to 14 years to get to IPO. And we're seeing this massive growth in VC asset class that's leading to portfolio bloat across venture. Is there anything else that you would say to help people understand a little bit more about secondaries?
3:08 Speaker 02 I mean, it sort of sounds like I'm probably talking our book, but I really think it's a one in a generation opportunity in the secondary market. And I think there is incredible need to be helpful to companies that are staying private. And it seems that there's a, an event every few years that keeps the IPO market shut. It's been our hypothesis that by the time this market, call it the liquidity flywheel, starts to spin again, you're going to have very mature companies like pushing 20 years old, right? They're no longer startups as defined by usually them just being private, right? It's almost nomenclature to say, oh, it's a startup because it's private. So the way we see it is that we think the secondary market is a pressure relief valve that'll help keep companies private for a long time. But in order to do that, there needs to be a good
3:53 Speaker 02 foundation and enough folks involved here to help make sure that these companies have the liquidity that they need to do what they do best, which is grow their business.
4:02 Rebecca Bellan? Walk me through that. So two questions there. One, why do we want to keep companies private for longer? And two, secondary shares don't go to the company directly. So how does that keep them flowing in business?
4:12 Speaker 02 The way I would think of it is, most companies today want to be able to perfect their business before they go public. Oftentimes, once you're a public company, you sort of get penalized for, let's say, shifting focus, growing your business, making even what you would think would be a subtle change in the private markets to your company. And you have activist investors who will sit there and sort of punish those businesses. For that reason alone, companies would like to stay private for a much longer period of time in order for them to perfect their business model and maximize their outcomes. Which has been a trend since 2000, when your average tech IPO was a three or four-year-old business and in 21 was pushing 13. By the time this IPO market probably opens up again, like I suggested, you're probably 17, 18, 19, 20 years old.
4:56 Speaker 02 The way we see the secondary liquidity is it's really a pressure relief valve, like I suggested on the cap stack. What happens is, let's use 2021, over that 13-year timeframe, that that average tech IPO is private. They raised capital from seed investors, maybe traditional VCs. And over that time, what you have is, you have three constituencies that bubble up for liquidity. Employees who leave, that have oftentimes stock options. And if you're a US shareholder, once you exercise those shares, there's some punitive issues that happen with the IRS that wants you to pay a tax bill on that common stock, as an example. The second problem is the RSU problem, which you're seeing play out in real time. Facebook was the first company that I saw with RSUs.
5:39 Speaker 02 So they have this double trigger that when you're nine sort of kicks in, you can extend it a year or two. But if you are latent with RSUs, they can expire worthless if you don't convert everything to common through a liquidity event like an IPO. Or you do what Databricks did, and you raise billions and billions of dollars in order to pay a tax bill, plus, you know, potentially provide liquidity to some early employees like they did. And then the third problem has been a consistent problem, I think, in venture, which I call it the DPI problem. And the DPI problem, meaning that most venture funds are a 10-year proposition, they could last a year. Too longer potentially, but eventually due to the power law, all their returns are tied into one name and they need that sort of liquidity.
6:19 Speaker 02 And all of that has a negative effect on the founders of those companies who not just want to grow their business, but they're now dealing with these constituencies all sort of knocking on their door, looking for liquidity. And you either are forced then to go public prematurely because you're potentially not ready, or you need to provide some sort of relief for those shareholders.
6:40 Rebecca Bellan? Okay, so it's giving shareholders and early employees and people who have invested in some way into the company, a way to get that liquidity before you're ready to, but without forcing you into going public or forcing you to get acquired or some kind of other liquidity event.
6:54 Speaker 02 That's right, exactly.
6:55 Rebecca Bellan? Okay. One thing that we're noticing a lot is that there's an increase in retail investors who are accessing the secondary market. Recently Yahoo came out with a tool, I'm sure you've seen in partnership with Equities Zen and Forge. It allows retail investors, these are still accredited investors, but retail investors access to real time private data, public to private comparison tool, lower investment minimums, as low as like $5,000, I believe, and integrated trading access. So there's just like a link, you know, you can click on SpaceX, go to the Equities Zen link and it says, do you want to invest? And if you've got an account, you can just go ahead and ostensibly do that. Again, still needs to be an accredited investor, but the barrier to entry seems like it's
7:37 Rebecca Bellan? a lot lower these days to be an accredited investor. Is that your understanding of that?
7:42 Speaker 02 I'm not sure if the barrier is lower. I think that probably due to inflation and things of that nature, there's a lot more accredited investors. It's a term that was developed decades ago and there's been very few attempts to sort of change that. Now, I feel two ways about this, right? The first way I feel is I think investors should have the right and the ability to invest in this asset class. And I don't think it's the same, but that same type of investor has the right and ability to go to Las Vegas or Atlantic City and try their hand at games of luck.
8:13 Rebecca Bellan? Well, in those cases, the house always wins. So they're gonna lose their money.
8:17 Speaker 02 That's exactly right. But my point is, they could sort of bet away their children's college fund.
8:23 Rebecca Bellan? Yeah.
8:23 Speaker 02 As opposed to, and then the government will step in here and say, okay, well, you can't invest in a private venture-backed technology company, which seems at sort of odds with each other.
8:32 Rebecca Bellan? Exactly.
8:32 Speaker 02 But I think the problem oftentimes with a lot of these tech platforms is that they're trying to solve for what they believe is a glitch in the market. Rights of first refusal, co-sale provisions.
8:43 Rebecca Bellan? Can you define those for us, please?
8:45 Speaker 02 Sure. So shares, private shares of these companies that we're talking about, often have provisions associated with it that have rights of first refusal, meaning that a company or another investor might have the ability to purchase those shares if they're submitted for a private transaction. And what I think a lot of the technology companies are trying to solve for is a more efficient transaction process between private companies and new and/or existing shareholders. Unfortunately, I don't think that that's a glitch. I think that's a provision or a moat. So it's not going to be fixed by technology. I think the biggest problem that the technology platforms haven't solved for yet is the informational
9:28 Speaker 02 asymmetry from an outside investor who's looking to invest in one of these private tech businesses. I think that informational asymmetry is a killer. So you have buyers of a junior security, they could get burned by hidden stuff like, maybe there's a new round of funding coming that has 3X liquidation preference. And then that seller wants to sell now and maximize value and then potentially invest in the next round. Or maybe the next round has participating preferred or something along those lines. But I think it's really, right now, it's buyer beware. Because, yes, you may want to own these companies, but if you don't know anything about the company and you're only buying it so you could go to the golf club and talk to your friends at the cocktail parties about you're an
10:09 Speaker 02 investor in XYZ amazing unicorn, right? That's not a really great reason or solid value proposition to try to own one of these businesses.
10:17 Rebecca Bellan? Well, what if they say, you know, MVP is an investor and Andreessen Horowitz is an investor? That's good enough reason for me. They've clearly done their due diligence. Like, is there a reason to not trust the big guns to pay attention on your behalf?
10:28 Speaker 02 Well, I think that's where this market was born is based on momentum. But I think that the traditional retail investor doesn't understand that deal terms are everything. Structure, rights, liquidity terms, they matter big time when you're playing in private deals. You need to know what you're getting into or else you're buying trouble. So without transparency on upcoming rounds, the types of shares you own, what's actually happening with the business, it's buyer beware, limiting the market's potential for fair and valuable liquidity, I think.
10:56 Rebecca Bellan? So I want to talk a little bit more about that informational asymmetry. You mentioned a few things, but what are the main things that someone coming into the secondary market? What kind of information are they really lacking? Their due diligence and that you said they're not always aware of the type of shares they're buying. So what else?
11:11 Speaker 02 I think the first one is sort of investing 101, right? Which is you want to know what's going on in that business. Public companies have the ability to file quarterly and annual reports. In this case here with private companies, you don't have that same access to that information. So what ends up happening here is you're actually flying blind. You're saying, I'm interested in this business because XYZ investor is already an investor. Now, okay, maybe that's a good reason, call it, you know, a first order reason to take a look at a company like that. But it's not the reason to necessarily invest in that business. Then what ends up happening is it depends on where that investor invested. That investor that you suggested could have invested five, six, seven years ago,
11:51 Speaker 02 and you're following them five or six, seven years later in the hopes that the company did everything that that investor thought that that company would do. And lastly, like I said, I think it's the provisions of those later stage rounds you have to watch out for. I'm an investor in a lot of series C and beyond companies. Oftentimes there are warrants that sit at the top of the cap stack. There are multiple X liquidation preference, meaning that in a negative scenario, you stand in front of those junior securities multiple times. And I could say almost matter of factly, if you're buying secondary as a retail investor, you're usually buying a junior security like common or A that don't necessarily have those same provisions that come in those later stage rounds.
12:30 Speaker 02 I do agree that there should be more access by, call it the retail investor to these types of companies. But yet at the same time, they need to know exactly what they're getting into. And I think most investors don't have the base of knowledge to fully understand.
12:44 Rebecca Bellan? Does this create a world in which a lot of these retail investors could be taken advantage of by larger firms that are just trying to create their own liquidity events? You'll see a founder talking on X about how their company is booming in the secondaries and look how much they're doing. But sometimes these are pre-revenue companies that are building pioneer technology and it's not exactly clear that they're going to hit the moon, but they're certainly hyping themselves up as if they are. And I'm sure their investors are as well. Does this create more of a Wild West scenario?
13:15 Speaker 02 I think so. And this is sort of where it all started. I think if you go back to the early days of the secondary markets, it was the Wild West. You had a couple of key or core institutions that were investing in companies like Facebook and Twitter, companies like LinkedIn and a handful of others. But then it was sort of the rise of the over-the-counter platform technology that was providing interesting access to these companies. But it was a different moment in time. These were very late-stage businesses. They didn't need or want capital. And I think what you saw between then and now is a lot more capital sort of pile into these companies, bringing up their valuations and their multiples pretty aggressively. In the end, I think that buyers of junior securities have to really be very, very careful
13:59 Speaker 02 as they're thinking about where they want to invest and how they want to invest. I don't necessarily think that the CEO that's on CNBC or Bloomberg is trying to pump out their shares, but is it a possibility that it could occur? Absolutely. Without investing off of information, I think you're going to have a really challenging time of being successful the way you need. I don't think I know any professional investor who closes their eyes and jumps into an investment without doing proper diligence on that company.
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15:01 Rebecca Bellan? So you mentioned earlier in our chat that the secondary market is good generally for founders because it helps provide liquidity to their investors and people who've invested in them. Why aren't companies more forthcoming about what kind of revenue they're bringing in, what their balance sheets look like, things like that, to investors in secondary shares? Is that something that is really uncommon and why?
15:19 Speaker 02 I think if you're still talking about the platforms, then they would be a public company at that point. If you're going to release GAAP financials to the public, then you might as well just be public at that point and, you know, go that route. Your traditional professional secondary buyer gets that information. There's two types. I think you have those who invest as LPs and then get the information that way and then invest into key pieces of those portfolios and grow their presence in those businesses that way. And then the second one is how we do it, which is we like to land in the primary first, so Series C or Series D, and then expand through secondary. So we've developed that relationship with the company that we're able to get the information that we need and then be able to look back on the business six months, 12 months, 18 months,
16:02 Speaker 02 24 months, when they don't need or want capital with a full understanding of where they were, where they're going, what milestones they hit, what milestones they missed, and then being able to sort of add to your position as an investor through secondary. I think it's an interesting sort of dichotomy that exists in the market, but at some point, there will be institutional-grade infrastructure, not necessarily digitizing trades, but servicing the sophisticated needs of top companies and their shareholders that are navigating this complex and dynamic market at scale. It's not quite there yet today.
16:34 Rebecca Bellan? You know, you're touching on an important point, like that kind of relationship. I feel like the secondary market is, it's based on a lot of close relationships between, as you say, you're already an investor in X company and then you will invest in their secondaries later. You already kind of have all that information. This is something that, as we said before, that retail investors are lacking if they just want to get involved. Another side tangent, you mentioned that activist investors in a public company, they might have problems with changes the company's making when they're just trying to grow. Is it possible that as the retail investment space and secondaries grows, that you might start seeing more activist investors in that space? I guess that probably wouldn't have the same effect though, because they wouldn't have the same control in their shares.
17:15 Speaker 02 Control or short sellers or things of that nature that could really affect them. I mean, they could get onto their board potentially and try to help guide the business. But when we talk about retail on this side of it, retail's been cut out of the IPO market 15 years ago. So there's been more and more of a push to institutionalize everything for a variety of reasons. It used to be that advisors would call their best clients and say, hey, we have a hot issue. Or something along those lines, and that stopped. To your point, I think secondaries will probably continue to grow. You'll probably see, and we have seen sort of crossover investors come into the market. And when you sit in a world today where you've had the longest IPO drought ever, 39 months and counting, which is worse than the dot com crash, which was 33,
17:59 Speaker 02 or the global financial crisis, which was 25, and you've had less than 20 VC-backed tech IPOs from 22 to 24 versus over 180 in 2000 or 71 after the great financial crisis, something needs to change. And what needs to happen is either companies decide to bite the bullet and go public, even though they're not necessarily ready for it, or there needs to be a greater shift and infrastructure put in place to help provide that broad-based liquidity as sort of a bridge to the IPO markets. Until that comes, you're going to sit here in an interesting world where I think you're going to start to see more Wall Street-style investment banks and the like start to move to the private side of things.
18:43 Speaker 02 I could tell you that almost every big Wall Street firm today, there's a desk for secondaries. And there's been an evolution there, too. They used to do it just to try to capture the C-suite and the founders, provide some liquidity, capture that money through their, call it wealth management, side of their business. But ultimately, today, I think now they're starting to think a little bit more about tender offers and things of that nature because, look, the Klarna IPO was supposed to be a billion, and there was a $10 billion need on the Databricks side of things.
19:11 Rebecca Bellan? Yeah.
19:12 Speaker 02 I think that you're going to start to see a greater push for infrastructure, and it's probably going to come from Wall Street as opposed to Silicon Valley.
19:19 Rebecca Bellan? Yeah, I mean, you've talked before about how firms like Goldman can make more money running a tender than an IPO. Like Blackstone, Apollo Global Management and KKR, they've all launched dedicated funds for retail investors as well. Like as this market grows, are we just trying to get money from wherever we can here? Is that what you're suggesting?
19:37 Speaker 02 No, I think the total addressable market has grown for secondaries. If you go back to, call it, 2009, there was 100-ish unicorns. Now there's 1,200 unicorns. There's a lot of later-stage private companies. And if they're going to stay private, then close to 20 years, the TAM for these things grow and more liquidity needs to come in. So whether it is more secondary-style venture funds that need to bubble up or other means such as mutual funds that invest in these things, which there's several of them that exist today. I just think that there is a growing gap that exists in the market that is slowly being solved. But money in the US seems to move fast. Would I be shocked that in two years from now, you and I have a follow-up conversation talking about the robust infrastructure
20:22 Speaker 02 that's sort of existing at these giant VC-style investment banks? And from the traditional more private equity folks in the mutual funds? I wouldn't be shocked at that at all. I think it's coming. I think it's a freight train and I think that we'll wake up at some point in the near term and see it pretty quickly.
20:37 Rebecca Bellan? Are there any other trends that you are expecting or that you're noticing in the secondary world?
20:41 Speaker 02 Oh, I'm starting to see a little bit more sort of pricing that is happening based on secondaries, which is really interesting. I mean, the first time I saw that, to be fair, was around Twitter before it was X, when it was private to public the first time, 2013. They were really the first to list secondary transactions within their S1 filing ahead of their IPO. That was really interesting to me. Even companies like CoreWeave set realistic public valuations when they decided to go public based on secondary transactions also. So it's really an interesting trend that we're seeing come down the pipe where you're having this data set
21:19 Speaker 02 that the company has and has access to and then gets sort of shared with potential investors to help price that public market issue.
21:27 Rebecca Bellan? Is this going to be like a reinforcing cycle? As it becomes easier to get liquidity on the private markets, do we expect to see even fewer IPOs in the future?
21:38 Speaker 02 I think so. If we're talking about market context, unicorn backlog right now is insane. So you have 750-plus US unicorns, 400-plus of them are 10-plus years old. If you do the math on that and you say, okay, even at 25 IPOs a year, it'll take 17 years to clear them. We've had now five per year over the last few years, and the median IPO age can hit 19 years. So if I had to look ahead, by 2030, you're looking at 580 unicorns will be 10-plus years old. You have employees that are facing 10-year option expirations. You have RSU tax burdens growing. So yeah, I do think it's this snowball effect. Too many unicorns, not enough IPOs, plus hundreds of billions of dollars
22:21 Speaker 02 in VC dry powder, which is keeping companies private as they need liquidity over capital. You know, I think the secondary market has the potential to skyrocket, and IPOs will eventually, I think, be a clearinghouse, not necessarily a capital race. With that said, secondaries end up becoming the future of private market finance. So I know it's self-serving, but there needs to continue to be institutional-grade infrastructure, not just digitizing trades. It's about serving the sophisticated needs of these companies, not just about trading on some sort of platform somewhere. I think the secondary market will continue to thrive because the IPOs and M&As are dead. I hope M&A starts to open up again, but like I said earlier, it has an inverse relationship. When liquidity markets tank,
23:04 Speaker 02 secondary markets soar. And right now, it's this weird perfect storm.
23:08 Rebecca Bellan? Wow. Yeah. Well, watch this space, listeners. Hey, Jared, thank you so much for coming to join us on Equity. Where can our listeners find you? Are you active on the socials?
23:18 Speaker 02 I'm lightly active on Twitter. I'm more active on LinkedIn. You could find me at Jared Carmel or on Twitter at MVPVCJared, J-A-R-E-D. Other than that, I'm happy to talk to anybody anytime about what their potential liquidity needs are. But thank you very much for having me on. This was a lot of fun. And if there's any follow-up questions that you have, I'm your guy.
23:37 Rebecca Bellan? Thank you so much. To our listeners, you can find me on Blue Sky and X, and you can find Equity at EquityPod on the same platforms. Talk to you next time.
23:48 Rebecca Bellan? Equity is produced by Teresa Locan Solo with editing by Kel. We'd also like to thank TechCrunch's audience development team. Thank you so much for listening, and we'll talk to you next time.
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