EquityZen
  • ···
  • Marketplace
  • ···
  • How it Works
  • ···
  • Knowledge Center
  • ···
  • About
  • ···
  • ···
  • ···

Investor Newsletter >

Weekly Update #183: Direct Secondaries vs Secondary LP Stakes

EquityZen
Direct Secondaries vs Secondary LP Stakes 
You've heard EquityZen use the term "secondary market" quite a bit. It refers to the fact that shares sold on our platform are usually (but not always) sourced from existing shareholders (as opposed to a "primary market" where shares are issued directly by the company). In the industry, these are referred to as "direct secondary" transactions.
 
And you also already know that an investor in a Venture Capital or Private Equity fund is known as a "Limited Partner", or "LP" for short. But what you may not know is that there exists an active secondary market for those LP stakes as well.
 
To make things even MORE complicated and convoluted, a "private equity secondary sale" can refer to either the sale of shares of a company (like what EquityZen does), or to the sale of an LP stake!
 
Thoroughly confused? Don't worry. Here's a good way to know which type of transaction is happening:
  • If the transaction involves the sale of a portfolio of securities (ie: shares of multiple companies), it's a Secondary LP sale
  • If the transaction involves the sale of just one company's securities, it's a Direct Secondary

And if you're curious, the market for Secondary LP stakes is pretty huge:

The market for Secondary LP stakes actually operates similarly to the marketplace that EquityZen has built for direct secondaries:

  • Investors are seeking access to a proven portfolio of private companies, and can benefit from some "selection bias" in knowing how the companies have performed thus far
  • Sellers are motivate to sell part of their holdings, for reasons that include diversification and liquidity needs
  • General Partners (GPs) of the Funds must approve the transfer of LP stakes (similar to how individual companies must sign off on direct secondary transactions on EquityZen's platform)

You can read more about the Secondary LP market here.

 
In other news...
  • Lyft's co-founders claim 'smart lanes' could make traffic disappear (Business Insider)
  • Evernote attempts to simplify with its new iOS app (TechCrunch)
  • Postmates and DoorDash are testing delivery by robot with Starship Technologies (TechCrunch)
  • Eye on the Market Outlook 2017 (JP Morgan)
View more newsletters

Join 290,000+ global shareholders and investors on EquityZen

Marketplace

  • Shareholders
  • Investors
  • Multi-Company Funds
  • Investment Returns

Resources

  • FAQs
  • Blog
  • Newsletter
  • IPO Center
  • Knowledge Center

Company

  • About
  • Careers
  • Press
  • Contact Us

Connect

Investment opportunities posted on this website are "private placements" of securities that are not publicly traded, are subject to holding period requirements, and are intended for investors who do not need a liquid investment. Investing in private companies may be considered highly speculative and involves a high degree of risk, including the risk of substantial loss of investment. Investors must be able to afford the loss of their entire investment. See our Risk Factors for a more detailed explanation of the risks involved by investing through EquityZen’s platform.

EquityZen Securities LLC (“EquityZen Securities”) is a subsidiary of EquityZen Inc. EquityZen Securities is a broker/dealer registered with the Securities Exchange Commission and is a FINRA/SIPC member firm.

Equity securities are offered through EquityZen Securities. Check the background of this firm on FINRA’s BrokerCheck.

EquityZen.com is a website operated by EquityZen Inc. ("EquityZen"). By accessing this site and any pages thereof, you agree to be bound by our Terms of Use.
EquityZen and logo are trademarks of EquityZen Inc. Other trademarks are property of their respective owners.
© 2023 EquityZen Inc. All rights reserved.

  • Disclosures
  • Business Continuity Plan
  • Privacy Policy
  • Allocation Policy
  • Form CRS
EquityZen Inc.
30 Broad Street,
Suite 1200
New York, NY 10004

Secured via DigiCert Extended Validation certificate
FINRA's BrokerCheck
SIPC