For decades, venture capital operated under a simple assumption: invest early, exit within five to seven years, and return capital within a 10-year fund lifecycle.
That model no longer holds.
Companies now remain private far longer. While tech giants like Google (now Alphabet) and Apple went public relatively early in their growth cycles, modern scale-ups often delay IPOs well beyond a decade.
A striking European example is Klarna, which reached public markets after roughly 17 years.
This shift creates a structural liquidity gap: LPs expect distributions, employees hold concentrated paper wealth, and early angels sit on illiquid positions. VC secondaries step in to bridge that gap.
Rando Rannus, General Partner at Siena Secondary Fund and featured guest on 0100 Impact Talks, argues that this is not a cyclical phenomenon, but a permanent structural shift in private markets.
What Siena Looks For: Europe’s Hidden Champions
Siena Secondary Fund targets high-growth scale-ups across Central and Eastern Europe and the Nordics.
The profile is precise:
Category leaders
€10M–€100M+ revenue
Strong growth trajectory
Tier-one investors on the cap table
3–5 year exit horizon
Partial liquidity transactions
Rather than chasing the most hyped global names like OpenAI or SpaceX, Siena prefers less crowded opportunities where information access and pricing discipline are achievable.
In Rando’s view, buying into opaque SPVs stacked on SPVs may create liquidity—but rarely conviction.
The Biggest Misconception: “What’s the Discount?”
One of the most frequent questions secondary investors hear is: “What’s the average discount?”
Rando considers this the wrong starting point.
Discount is not alpha.
A discounted asset with deteriorating fundamentals remains a poor investment. Conversely, a high-quality growth company purchased at a modest discount can generate attractive risk-adjusted returns.
Key underwriting factors include:
Performance since the last funding round
Cap table structure and liquidation preferences
Supply-demand balance in the secondary market
Exit visibility
Access to financial and operational data
Secondary investors often purchase positions lower in the preference stack—implicitly assuming higher structural risk. Proper modeling of exit waterfalls and potential down-round scenarios becomes critical.
Europe’s Liquidity Inefficiency = Opportunity
Unlike the U.S., where brokered platforms and specialized secondary funds dominate, Europe remains fragmented and inefficient.
This inefficiency creates pricing power for disciplined secondary funds.
Geographically, the conversation highlights why the Nordics and the Baltics outperform relative to size. Estonia, in particular, benefited from its “Skype moment,” when Skype created capital, know-how, and belief across the ecosystem.
Small domestic markets force founders to think globally from day one—a structural advantage compared to larger European economies that can remain domestically focused.
The Downside Protection Argument
Historical data shows a meaningful difference in downside risk between early-stage VC and secondaries.
Rando points out that approximately 25% of early-stage VC funds historically fail to return 1x capital. In contrast, secondary funds have exhibited far lower capital loss ratios over long-term datasets.
However, he is clear: secondaries are not risk-free.
Market shifts, unexpected capital raises, or cap table restructurings can erode anticipated returns. The strategy requires underwriting discipline—not merely opportunistic buying.
Education: The Missing Layer
A recurring theme is education.
Many founders and employees do not understand:
The value of stock options
Liquidity planning
Secondary transaction mechanics
Governance provisions affecting transfers
Rando suggests that liquidity planning should begin around Series A—not at IPO.
Companies must proactively structure ROFRs, board approvals, and internal processes to enable orderly secondary transactions. A transparent approach benefits employees, investors, and ecosystem recycling.
A Structural Asset Class in the Making
The secondary market is consolidating globally, with major financial institutions acquiring platforms and building scale. This signals institutional validation.
For Europe, VC secondaries represent more than liquidity—they represent ecosystem reinforcement. Over 70% of sellers in Siena’s transactions reportedly reinvest proceeds back into startups or venture funds, fueling the next wave of innovation.
As Europe competes globally in AI, fintech, deep tech, and defense tech, liquidity infrastructure becomes essential—not optional.
VC secondaries are no longer a niche. They are becoming a core pillar of private markets.
