The secondary market

Part of my job requires me to be pretty tied into the secondary market for startups. While we do not buy or sell shares, it’s always good to see where trades are happening so we can better inform our clients.

After being largely dead for almost an entire year, I’m finally starting to see life in the secondary markets. Bid/ask spreads are narrowing and investors are starting to put their money where their mouths are.

As expected, the pricing is largely depressed to where most of these companies were last valued. The most stable companies are selling at a 30% discount while the average seems to be about a 50% discount.

I expect a lot of the pricing to stabilize. There’s been a lot of volatility in the last year, and we’re likely going to start settling into these large discounts as the accepted pricing.

I do not expect the pricing to dramatically get better anytime soon. Just as I mentioned last year that we’re seeing the tip of the iceberg of layoffs, I believe we’re just seeing the tip of the iceberg when it comes to down rounds. A lot of mid to late stage companies will need to have their valuations reset in the coming few quarters.

The positives to all this is that we can move on and come to terms with the new reality.