Across Europe, startups and investors are waiting longer than ever for IPOs or acquisitions. Because of this, the secondary market, where investors and employees can sell shares in private companies, has become an essential part of the venture ecosystem.
Once seen as a niche area, secondaries are now a practical way to create liquidity without needing a full exit. To explore how this shift is changing the market, we spoke with Rando Rannus, General Partner at Siena Secondary Fund, one of the few funds in Europe focused on this growing space.
Rando has been working closely with founders, investors, and limited partners to make secondaries more accessible and better understood.
In our discussion today, he talks about why liquidity matters right now, how investor behavior is evolving, and what needs to happen for Europe to catch up with the US.
Why Liquidity Matters More Than Ever
IPOs are taking longer, and mergers and acquisitions have slowed down. Because of this, investors, founders, and employees are waiting much longer to get returns from their equity.
Secondary deals now fill that gap by allowing people to sell shares in private companies without going public. They give early investors and employees a way to access cash while keeping companies stable and growing. The rise in secondary activity shows how important liquidity has become in today’s market.
“I believe the timing is right, and that’s not just my opinion; the facts support it.
Every year, new records are set for how much capital is raised for secondary strategies, yet this still represents only a small share of the total startup market.”
Going from niche to mainstream
Secondary investing started in private equity but has now expanded into venture capital. Investors are focusing less on early-stage startups and more on proven, fast-growing companies that already have strong revenue. These types of deals give both founders and early investors more control over when they take returns, rather than waiting years for a full exit.
“For example, Goldman Sachs recently acquired Industry Ventures, one of the leading VC secondary firms. Their latest fund was $1.5 billion, and total assets under management reached around $8 billion.
That deal shows this market is no longer a niche, it’s becoming an established, long-term part of the investment landscape.”
Europe is now going through the same changes that happened in the US about ten years ago. More funds are being created to focus only on secondary deals, and the process is becoming more standardized. What used to be a niche strategy is turning into a major part of venture capital, helping the market stay active even when traditional exits slow down.
Investor Behaviour is Changing
Limited partners (LPs) and venture capital funds are viewing secondary transactions as a smart and responsible way to manage portfolios. Rando explains that in the past, most VCs held their positions until the very end, waiting for a big exit. Now, more are selling portions of their holdings earlier to return capital to investors.
“We’re dealing directly with company shareholders, founders, employees, angels, and early investors. In the past, VCs weren’t usually the ones looking for liquidity, but that’s slowly starting to change.”
He pointed to the case of Eleven Labs, a fast-growing Polish AI company that reached unicorn status within just a few years. Early investors like Credo and Concept Ventures sold part of their stake when the company hit that milestone.
“They returned their entire fund to their LPs while still keeping their position.
It’s a great story that shows even when you have a rocket ship, it’s reasonable to give something back to the LPs. You offload a bit, and everyone’s satisfied.”
We are entering a new phase in investor behavior, secondaries are no longer viewed as a last resort or a signal of trouble, but as a natural part of the venture capital cycle. The approach gives funds a way to secure returns earlier, reduce risk, and keep capital flowing back into new opportunities.
It’s a win-win for everyone.
Market Education and Misconceptions
Education remains one of the biggest challenges in the secondary market, especially among founders, employees, and early investors. Many still misunderstand how secondaries actually work and how pricing is determined.
“Initially, everybody thought that if you have a new funding round and a new share price, then if you’re selling your shares, it should be at the same price.”
But in reality, share class structures and liquidity discounts make things more complex.
“Employees often don’t understand that different share classes have different values, and there should always be some kind of discount built in, both for liquidity and share class perspective.”
These misunderstandings aren’t limited to pricing. In younger ecosystems, where startups and investors are still learning about exit options, the lack of knowledge can make secondary discussions even harder.
“In some regions, you still have to explain that there’s even a possibility to sell shares.
You need to educate not just founders, but also angel investors, on when is the right time to sell and what the main principles are.”
Ecosystem maturity has an important role in how secondary markets develop across Europe. In regions like the Baltics, where startup activity is high and multiple unicorns have already emerged, people are much more familiar with how liquidity works.
“We started out here in Estonia. We have quite a lot of scale-ups, and many of them already have liquidity plans in place.
Some of the best companies promote this themselves as part of their employer branding, showing that stock options are actually worth something.”
In less developed regions, however, secondary transactions are still not well understood.
“If I go to other countries where the ecosystem is less developed, you still need to explain what the options are and that there’s a possibility to sell them.
For example, the Baltics already have success stories like Wise, Bolt, and Vinted, while the Balkans are still catching up.”
The Road Ahead for Europe’s Secondary Market
Rando is confident that Europe’s secondary market is just getting started. Over the next five to ten years, he expects to see significant growth driven by new funds, digital platforms, and specialized brokers entering the space.
“Europe has been behind the US, but we’re following the same path.
There will be more funds doing secondary deals and more platforms focused on specific markets. I just spoke today with one in Sweden, and there’s another being built in Denmark.”
He believes that as awareness grows, more investors will recognize the potential of secondaries as a lower-risk way to gain exposure to private tech companies. One group that could transform the market is institutional investors, particularly pension funds.
“European pension funds are still too risk-averse and not allocating enough money to venture and private equity. Secondaries are the best way for them to start, it’s lower risk, with faster cash returns.”
From a policy standpoint, Rando also noted that regulations and infrastructure vary across Europe, but that ecosystems such as the UK, the Nordics, and the Netherlands already offer a safe environment for deals.
“Estonia already functions as the EU’s ‘28th regime.’ We have the digital infrastructure, e-residency, and simple tax system, everything needed to do business globally.”
Beyond the Hype: Finding Real Opportunities in Secondaries
When asked what kinds of companies he targets, Rando says his approach is simple and grounded in data, not hype.
“I always tell investors who ask what kinds of companies we focus on that the answer is simple: look back 7, 10, or 15 years and see which startups were most funded then and have since become strong, established businesses.”
These companies are often B2B SaaS firms, marketplaces, or fintechs that have already proven their value and grown into reliable, sustainable businesses.
“We’re quite agnostic when it comes to sectors. Our focus is on growth and on the best-performing companies from those earlier funding cycles that have matured into significant businesses.”
Rando believes that while the global spotlight often falls on a handful of high-profile tech giants, the real investment opportunities lie elsewhere.
“At a global level, everyone is chasing the same well-known private giants, companies like SpaceX, OpenAI, Databricks, and others. But those are outliers and don’t represent the full picture.”
He notes that data showing secondaries trading at premiums can be misleading because most transactions involve those top-tier names.
“Around 80% of deals are done with the top names, and that distorts the picture. There are many other great companies outside that top 20 where investors can still find solid opportunities and reasonable discounts.”