Staying Private: The New Path for Liquidity

The shift toward secondary share sales, as opposed to traditional initial public offerings (IPOs), is a reflection of several interconnected factors shaping modern tech financing. This trend raises important questions about the evolving dynamics of capital markets, particularly for high-growth technology companies. These factors include market volatility, regulatory pressures, and the desire for founders and employees to maintain operational and cultural autonomy while still accessing liquidity.

Staying Private: The New Path for Liquidity

The data presented in the graphic below demonstrates how secondary share sales from just seven private companies — including major players like Stripe, Canva, and Databricks — have collectively raised more funds than all tech IPOs combined in the past two years. This underscores the declining reliance on public markets as a source of capital for private tech companies. Instead, companies are leveraging secondary markets to provide liquidity for founders, early employees, and even some existing investors, bypassing the traditional IPO route.

This phenomenon is emblematic of a broader shift in the capital-raising landscape. In the past, going public was seen as the ultimate milestone for a company, providing access to a broader investor base and enabling large-scale capital infusion. However, the volatility of public markets in recent years, coupled with rising interest rates and the complex regulatory burdens associated with being a public company, has made IPOs less attractive.