Is Europe’s secondaries boom only serving the 1%?

The Liquidity Illusion

For years, the venture capital promise was simple: build something great, grow it fast, and eventually, everyone gets paid when the company goes public or gets acquired. But that cycle has broken. The IPO window is essentially a wall, and M&A activity is stalled by high interest rates and regulatory scrutiny. In this vacuum, secondaries have become the new release valve.

We are seeing a massive surge in secondary transactions across the European tech ecosystem. These deals, where existing shares are sold to new investors rather than the company issuing new equity, are being framed as a sign of maturity. But if you look closer, this boom isn't a tide lifting all boats. It is a lifeboat for a very specific, very small group of people.

As a founder, you need to understand that the liquidity being bragged about in headlines is highly concentrated. We are entering an era of the '1% of startups,' where the top-tier performers get to cash out while the rest of the ecosystem remains stuck in paper-wealth limbo.

The Shift to Early-Stage Secondaries

Traditionally, secondary sales were something that happened right before an IPO. It was a way for founders and early employees at late-stage unicorns to get some house money off the table after a decade of grinding. Today, that timeline is moving forward. We are seeing secondary deals happening at Series B, or even Series A, in companies that show the slightest hint of becoming the next category leader.

From a builder's perspective, this looks like a win. It means you don't have to wait twelve years to see a dime. However, the appetite for these shares is incredibly narrow. Investors aren't looking for 'solid' companies anymore; they are looking for the top 0.1% of performers—the AI labs and fintech giants that have clear paths to dominance. If your growth is merely consistent rather than explosive, the secondary market doesn't exist for you.

This creates a dangerous divergence in the market. We have a small group of 'haves' who are achieving personal liquidity early, and a massive group of 'have-nots' who are holding equity that is essentially illiquid for the foreseeable future.

Why Investors Are Buying Early

You might wonder why a fund would buy shares from a founder at a Series B instead of just putting that money into the company treasury. The answer is simple: price and access. In a market where high-quality deals are rare, buying secondaries is often the only way for a new fund to get on the cap table of a winner without driving the valuation to astronomical levels.

For the buyers, it's a way to de-risk. They aren't betting on an idea; they are betting on a proven trajectory. But for the broader ecosystem, this behavior signals a lack of confidence in the long-term IPO market. If investors were confident that these companies would go public in three years, they would be less desperate to scrape together secondary crumbs today. They are hedging their bets, and founders should be doing the same.

The Founder's Dilemma

If you are a founder and an investor offers you a secondary sale, the instinct is to jump at it. Building is stressful, and the ability to pay off a mortgage or set aside a safety net is life-changing. But secondaries come with a hidden cost: signaling.

If a founder sells too much too early, it sends a message to the market that they might be losing their hunger. Conversely, if a founder refuses to sell while early employees are desperate for liquidity, it creates internal friction. Managing these transactions requires a level of sophistication that most early-stage founders aren't prepared for. You aren't just building a product anymore; you are managing a complex financial instrument.

• Check the discounts: Secondary shares often sell at a 20% to 50% discount compared to the last primary round. If you sell now, you are effectively saying you don't believe the next round will make up that difference.
• Watch the cap table: Bringing in a new investor via secondaries can complicate future governance. These investors didn't give money to the company; they gave it to you. Their loyalty is different.
• Employee morale: If only the founders get to sell, your team will notice. A healthy secondary program should include early hires who have put in the years.

The Impact on AI and Deep Tech

This trend is particularly visible in the AI space. Because the capital requirements for AI are so high, founders are looking for any way to de-risk their personal lives while they continue to dilute themselves to pay for compute. We are seeing European AI founders taking money off the table much earlier than their SaaS predecessors did.

This isn't necessarily a bad thing, but it does mean that the 'exit' is no longer a single event. It's a series of small liquidations. For builders, this changes how you think about milestones. You aren't just building toward a sale; you are building toward the next liquidity window.

A Fragmented Future

The danger here is that we are creating a two-tier startup economy. In the first tier, we have the 'Venture Darlings' who have access to secondary markets, constant capital, and personal wealth regardless of whether the company actually reaches an IPO. In the second tier, we have thousands of founders who are building real businesses but don't fit the 'blitzscale' profile, leaving them trapped in their equity.

This boom in secondaries is a band-aid on a broken exit market. It provides relief for a few, but it doesn't solve the underlying problem: we need more ways for companies to provide returns that don't rely on being a multi-billion dollar unicorn.

The secondary market is a mirror of the current VC sentiment: high conviction in the few, and total indifference toward the many.

If you're a founder, don't look at the secondary boom as a sign that the good times are back. Look at it as a sign that the path to a traditional exit is getting longer and harder. If you get the chance to take some chips off the table, take them—but understand that the opportunity is a privilege reserved for the very top of the pyramid. The rest of the market is still waiting for the lights to come back on.

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