Does scarcity of competing buyers in private secondary markets let investors capture outsized discounts and returns?

Mitchell Green · Mar 28, 2025

Buying LP positions in old funds whose NAV is concentrated in one company is economically the same as buying the company directly, and is the cheapest way in

Owning a wrapper that owns the asset is owning the asset — like buying the chair that owns half the table; old-fund LPs after 15+ years just want out, so you can buy in at four or five times earnings

Scope: requires the target to meet their investment criteria

60:22 20VC: Why Traditional VC is Broken: How VCs Learned Nothing from 2021 | Why LPs are More Important than Founders & Advice to Emerging Managers | Bull Case for Bytedance & Why TikTok's Ban Doesn't Matter with Mitchell Green, Lead Edge Capital

Mitchell Green · Mar 28, 2025

Single-asset old-fund secondaries remain an uncrowded strategy because most secondary buyers chase multi-asset portfolios

Secondary funds go after LP stakes spanning 30 funds and hundreds of underlying companies, while Lead Edge looks for old funds where 90% of NAV sits in one company and writes off the rest

63:33 20VC: Why Traditional VC is Broken: How VCs Learned Nothing from 2021 | Why LPs are More Important than Founders & Advice to Emerging Managers | Bull Case for Bytedance & Why TikTok's Ban Doesn't Matter with Mitchell Green, Lead Edge Capital

Mitchell Green · Mar 28, 2025

NAV is an irrelevant pricing metric in fund secondaries; only fair market value matters

If NAV were genuinely cheap he'd happily pay above it, but doing so would signal to the LP that he knows more than they do, so deals still get priced at a discount to NAV

63:04 Nav is an irrelevant pricing metric only fair market value matters

Harry Stebbings · Oct 18, 2023

It is a great time to be a buyer of secondary fund positions

He is seeing fund positions offered at 80% discounts

12:41 Buyers can currently get 80 percent discounts on secondary fund positions

Beezer Clarkson · Oct 18, 2023

The secondary market for fund positions hasn't fully connected yet and we're only seeing the tip of the iceberg

Buyers want 80% discounts and sellers aren't willing to sell at that level, so bid and ask haven't met

12:49 Secondary market for fund stakes has not fully connected bid ask gap remains

Larry Aschebrook · Jun 16, 2025

Because fewer institutions were taking companies public after the financial crisis while funds deployed ever-larger sums, companies would stay private far longer — creating a durable opportunity to buy shares from illiquid holders at attractive returns

Time from inception to IPO went from roughly three years pre-2010 to seven or eight years by 2018, and his average portfolio company is now 15 years old; meanwhile shareholders had no route to liquidity

9:03 Companies staying private far longer created a durable discount buying opportunity for secondary investors

Larry Aschebrook · Jun 16, 2025

In their early vintages they bought secondary directs at roughly 35 cents on the dollar versus primary buyers, because there was essentially no secondary buyer competition — you got real value rather than paying a premium for defensibility

There were no other secondary direct buyers at the time and companies had no other options for liquidity

17:26 Buying early secondaries with no competing buyers captures real value at steep discounts

Larry Aschebrook · Jun 16, 2025

Every vintage up until 2020 delivered a lot of value to secondary direct buyers, and that capability is now a key differentiator

18:06 Consistent vintage value creation through secondary buying is now a core differentiator

Larry Aschebrook · Jun 16, 2025

The core logic of secondary investing is buying at a discount in bulk, so that even if the company merely trades at its last round price you make a lot of money

You're chasing the discount value; a flat outcome at the last round price still delivers returns

50:35 Bulk discount buying pays off even if exit price merely matches the last round

Larry Aschebrook · Jun 16, 2025

You cannot build a scalable secondaries position in a company that goes from zero to 100 quickly — their Wiz position was only possible because capital availability was poor for eighteen months after the downturn

The strategy depends on dollar-cost averaging in through many transactions over time, which requires a window where even the best assets are capital-constrained

69:14 Scalable secondary positions require a capital scarcity window not fast scaling companies