Lion’s Mouth

“Lion’s Mouth” – a cartoon that illustrates the problem that CEOs of successful venture-backed startups face around the secondary market for their shares. Most startups never face the question of secondaries as their shares just aren’t valuable or liquid enough to attract buyers. But for a small group of fast-growing companies, it has become a defining feature of startup life. Venture secondaries are the resale of existing shares in private startups. Instead of money going to the company in a new round, it goes to founders, employees, or early investors who want to take some cash off the table before an IPO or acquisition.

The market began in the early 2000s when Industry Ventures bought portfolios from corporate VCs retreating after the dot-com crash. What started as distressed clean-up soon became a strategy in its own right, and China picked it up early as regulatory bottlenecks slowed listings and forced investors to seek other exits. By mid-2025, Chinese VC/PE secondaries had surged to ¥77.3 billion (~$11 billion), nearly double the prior year. In the U.S., the venture secondaries market is projected to hit $60 billion in 2025, while global activity has already surpassed $162 billion.

Big names have made it mainstream. SpaceX, for instance, regularly runs employee liquidity programs. In late 2024, SpaceX offered a $1.25 billion buyback at a $350 billion valuation, and is now preparing another insider sale that could value the company at $400 billion.

But not every secondary ends smoothly. Digital health unicorn Hinge Health tried a large secondary to give early staff liquidity only to see it collapse when buyers and sellers couldn’t agree on price. The failed deal fueled doubts about its valuation and left employees frustrated, a reminder that secondaries can solve retention issues but also backfire badly.