We Need Liquid Private Markets

We all know the trends. Companies are staying private longer. They're getting much bigger before going public. Retail is increasingly locked out of gains. LPs are sick of waiting a decade-plus for VC returns. And despite what are definitely more robust improvements in liquidity over the last few years—liquidity solutions still suck.

It's extremely difficult to exit positions. It's high-touch, can take dozens of hours to find buyers, go through due diligence, build custom docs, etc. And that's if you can exit at all.

A few stories these past few weeks reminded me just how broken this system is.

David Sacks Had to Take Massive Discounts to Divest

David Sacks of Craft Ventures recently said on All-In that when he was required to divest from his crypto and AI positions for his government role, he either had to pay a large tax bill or sell his positions at steep discounts. This divesting "costs you money"—it's not some hidden way to profit.

They noted that secondary sales of fund positions often clear at roughly 25-50% below current value. For Sacks, that likely amounted to very substantial eight or nine-figure paper losses just to sell his LP stakes.

Think about that. One of the most connected VCs in Silicon Valley—someone who arguably has better access to liquidity than 99.9% of LPs—still had to take a 25-50% haircut just to exit positions. If that's what it looks like for Sacks, imagine what it looks like for everyone else.

The Double Layer SPV Problem

There was another story that got a ton of buzz recently: a GP syndicating a double-layer SPV via a forward contract. Understandably, that GP got a lot of heat. But the reason why many GPs come to these structures is because private markets don't work for the most profile names.

There are some companies that trade their shares freely—Kraken and Ripple, for example. But there are far more that reject transfers outright and are insanely restrictive of their cap table, forcing LPs and GPs to find creative ways to get exposure to certain companies. And here we are—a mess of double-layer SPVs, forward contracts, and legal gray zones.

Here's why companies do this:

→ Restricting access to secondary positions forces investors to buy primary, which increases the price of primary shares and new issuance

→ Cap table control matters somewhat, specifically for companies with government contracts who want restrictions over their shareholder roster

→ It's just easier for legal and administrative purposes to keep the cap table tight

But the downstream effect is brutal: LPs and GPs are forced into convoluted structures because shares for many of the best companies can't trade freely.

I personally bought a Coinbase forward contract in 2018 because I couldn't buy direct shares. Luckily, I ultimately got those shares when the company went public—but it was a risk. Not everyone is so lucky.

Is the SpaceX Reckoning Coming?

We haven't seen the reckoning from all of this restriction yet on any meaningful scale. But if SpaceX actually goes public—and recent reports suggest they're exploring an IPO as soon as late 2026—I'm genuinely excited but also concerned to see the fallout.

Maybe there's none and everyone syndicating multiple layers of SpaceX equity was a good actor. But there are likely thousands of stacked SPVs into SpaceX, each with their own layers of fees, their own GP structures, and their own promises to investors. That unwinding is going to be interesting to say the least.

I just hope there's no fraud and that all of the underlying direct vehicles can deliver on shares and liquidity. Because if they can't, we're going to see a lot of very unhappy LPs and GPs who thought they owned SpaceX and actually owned a claim on a claim on a claim.

And unfortunately, these stacked SPVs shouldn't need to happen but with SpaceX not allowing shares to trade freely, LPs and GPs are forced into creative structures to sell positions. 

It Begs the Question: Why Would Anyone Go Public Today?

The benefit of going public used to be access to deep capital markets. But now? Mega funds, sovereign wealth funds, massive strategics—private markets can support tens of billions in primary financings for the best private companies without ever touching public markets.

SpaceX is sitting on $3+ billion in cash and generating an estimated $16 billion in annual revenue. They don't need to go public. OpenAI has raised well over $10 billion in capital over the last few years. The IPO window used to be something companies aimed for. Now it's something many of the best companies avoid.

Here's what a few startup execs have said on this:

Patrick Collison of Stripe has argued that public markets are better suited to companies in an "extract" rather than "expand" phase, and that Stripe is still growing quickly and investing heavily in new products, so staying private lets them prioritize long-term expansion over quarter-to-quarter results.

Ali Ghodsi of Databricks literally called it "dumb to IPO this year" (2024), saying they postponed going public until at least 2025 because of election-year macro uncertainty, interest rates, and volatility—which would create a bad window and a long, painful lockup period for employees. After raising over $10 billion in capital over the years, Databricks is flush with capital and can keep funding hyper-growth, R&D, and acquisitions without public markets. Ghodsi has also said it's less important to be public now than 10-15 years ago because late-stage private capital is so deep.

Elon Musk of SpaceX has long been vocal about disliking the constraints of being public, citing things like "frivolous lawsuits" and the drag of public-company regulation and governance on operating speed—even as he now says he's considering a path for public ownership.

Large companies are increasingly offering tender offers to employees who want to sell. That's become the new "IPO" for liquidity purposes—the mechanism by which paper wealth becomes real wealth without the hassle of public markets.

So why would a company that doesn't need capital ever go public?

These days, for the best companies, I don't know, honestly.

Something Needs to Change

Here's what could actually move the needle:

→ New requirements forcing transfers in private markets for companies over $X in assets—some regulatory push to make secondary trading frictionless once companies hit a certain size

→ Fund administrators creating better liquidity solutions for within-SPV trading, so LPs in the same vehicle can trade amongst themselves without company approval

→ New requirements or incentives that make being a public company actually attractive again—better regulatory treatment, lower compliance burden, something

The current system benefits founders, mega-cap VCs, and a small circle of insiders who can get allocation. Everyone else—retail investors, smaller LPs, employees at non-unicorn companies—gets locked out of the wealth creation happening in private markets.

As concerns about wealth disparity with the rise of AI are top of mind for me and many people I know, this needs to be a priority yesterday. Otherwise, we're just going to keep exacerbating the clear world of haves and have-nots.

The people building the most transformative companies of our generation are creating trillions in value. And almost none of it is accessible to regular people until the biggest gains are already captured.

That's not a feature of private markets. That's a bug. And it's one we need to fix.

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✍️ Written by Zachary and Alex