In the past, if the primary market was the shiny showroom where you first bought the brand-new car, the secondary market would be the back-alley scrap yard where you sold it for parts when things went south. Investopedia defines the secondary market as “where investors buy and sell securities after they have been issued in the primary market.” In other words, it was where investors, who had missed out on the IPO or wanted more for less, traded with other investors. But now, the landscape is changing.
Today, the entry of institutional giants such as Goldman Sachs, J.P. Morgan, and Charles Schwab is reshaping the secondary market. And not far behind are boutique firms that offer more unique opportunities than their larger counterparts. So, below, with the help of Rob Lusk from Duende, Simple explores what this means for family offices:
The institutional wave
Last year, Goldman Sachs announced its acquisition of Industry Ventures, a pioneer in venture secondaries with over $7 billion in assets under management. Shortly thereafter, Morgan Stanley moved to acquire EquityZen, a leader in pre-IPO marketplaces. And not to be outdone, J.P. Morgan and Charles Schwab similarly followed suit, integrating secondary platforms to complement their private market ecosystems.
So why this move by Wall Street? Well, one apparent reason is that some early investors will always need an off-ramp. Another not-so-obvious one is that companies nowadays prefer to stay private for longer. And venture capital with funding timelines needs a vibrant secondary market to manage its cycles.
For family offices hoping to invest early in sought-after private companies like SpaceX, Anthropic, or Stripe, collaborating with large institutions might be a viable option. Because these big firms operate on volume, they focus on established, high-demand, blue-chip names. This allows them to ensure the flow of sufficient capital to make the investment worthwhile. Furthermore, they target late-stage, pre-IPO blue-chip investments. However, this strategy often leads to crowded investments, as many pile in simultaneously, resulting in limited returns. This is precisely where boutique firms can offer a superior alternative.
The boutique difference
Since big firms favour blue chips, the most interesting opportunities often fall below their radar. For instance, what about the companies developing the batteries for Androids or other components that power AI? That’s where boutique firms are able to step in. Boutique firms target early- to mid-Growth-Stage companies. These are companies that usually have a proven product-market fit and are already generating real revenue, but just aren’t yet household names. In other words, the difference that boutique firms offer is rooted in a philosophy that prioritises quality and tailored deals over high volume.
For many family offices, the private market remains opaque and volatile, let alone entering secondaries. That’s why boutique firms like Duende focus on building strong relationships and prioritising education. Deploying capital into a relatively unknown startup can be complex. Knowing that this requires a high level of trust and accountability, the firm is open about the intricate details of the investment process. Partnering with them is like learning how the sausage is made, so to speak.
So, what’s the big deal?
As secondaries come to the forefront, one of the biggest misconceptions is that the market caters exclusively for companies nearing an IPO. This, however, is inaccurate. The secondary market is much broader than that. And that’s demonstrated by the presence of both large institutions and specialised boutique firms occupying the space.
For more conservative family offices, institutional firms can provide the comfort of a major global brand and high-volume access to late-stage “unicorns.” Conversely, for family offices seeking to generate their own alpha, boutique firms offer a unique path, focusing on earlier growth stages and providing specialised market insights.
So what is the best option between the two? Ultimately, the decision depends on the family office’s unique goals. What is undeniable, however, is that the secondary markets will keep changing, and expert guidance remains essential.
