Carta's 2021 liquidity report
Last year, the total funds raised by U.S. venture firms topped $128 billion—approximately a 50% rise over the previous record of $85.8 billion raised in 2020. Venture funds invested exceeded $300 billion for the first time, with $329.6 billion deployed during the year—nearly doubling the record $166.6 billion invested in 2020.
Even as venture fundraising and deployment surged across 2021, a stronger trend emerged: the movement toward private market liquidity. In 2021, Carta completed 129 secondary liquidity transactions for private companies—more than 4x the total conducted in 2020. Dollars transacted rose from $2.2 billion in 2020 to $7.4 billion in 2021. The movement toward private market liquidity also diversified across the U.S.: Companies based in California represented 53% of secondaries on Carta in 2021, down from 65% in 2019.
Excerpts from the 2021 Carta liquidity report follow below. Download the complete report here.
This new desire for private market liquidity has been driven by several factors. Many equity holders are looking to take advantage of a trend of substantial increases in startup valuation. Meanwhile, companies are remaining private for longer: The average private company was 12 years old at IPO in 2021.1 Finally, now that offering equity compensation packages is standard for fast-growing tech companies, many founders are looking for new ways to provide value to employees and potential hires. Equity without liquidity is no longer sufficient.
Liquidity for private companies is no longer reserved for late-stage firms. In 2021, 46% of secondaries were initiated by companies whose latest round was Series C or earlier.
This trend is reinforced by looking at the valuation of companies as they undertook a secondary offering. Just over half of companies that offered secondary liquidity in 2021 were valued at more than a billion dollars. Founders of younger and smaller companies are becoming more comfortable with the idea of enabling secondary liquidity for their employees.
As more companies turn to secondary liquidity, the structure and size of these programs has become more diverse. The number of shares available for purchase is a function of eligibility criteria and individual preference among employees at each company. In 2021, more than 40% of programs on Carta had less than $25 million in shares on offer, while 26% had over $100 million. The median program offered $35.2 million in share value to investors, up 5% from 2020.
There was less variation in total transacted value per secondary. Less than $25 million in share value changed hands in the majority of secondary programs.
1 Data referenced: https://site.warrington.ufl.edu/ritter/files/IPOs-Age.pdf