Types of secondary buyers in the market
There are six major types of active participants in the direct secondary market:
1. Existing investors or the company Existing investors in a company or the company itself can repurchase shares from employees or other investors.
2. A primary investor
Many primary venture capital firms have struggled to provide attractive returns and meaningful liquidity to their investors and as a result have considered or began to explore secondary transactions.
3. Fund-less sponsors
Fund-less sponsors are participants in the secondary market who aim to identify shareholders seeking liquidity and negotiate a transaction with them.
4. Secondary exchanges Thanks in part to some highly publicized transactions in 2010 (e.g., Facebook, Zynga, LinkedI…See More
A small group of players across the globe have been making the headlines with large direct or secondary investments in promising internet companies.
These include Digital Sky Technologies from Russia who has spent $800 million buying Facebook shares from employees;
6. Secondary funds
Broadly speaking, there are two types of secondary funds:
– direct secondary funds
Direct secondary funds are investment firms with dedicated capital whose sole mandate is to provide liquidity to sellers of private company shares.
– indirect secondary funds.
buy limited partnership (LP) interests in other investment funds and basically replace current investors in a fund.