Every secondary buyer eventually faces the same uncomfortable moment: you want to buy shares in a private company, the seller has a price in mind, and you have almost nothing to anchor against. No audited financials. No analyst coverage. A 409A valuation that may be six months stale. What do you do?
The short answer is that you build an anchor from indirect signals — primary round history, revenue multiples implied by leaked metrics, comparable public companies, and the bid-ask spread visible in the secondary market itself. None of these signals is definitive on its own. Together, they give you a range you can defend.
Start with the last primary round, then discount it
The most recent primary round price — the price per share paid by venture investors in Series C, D, E, or later rounds — is public record in most cases. It appears in SEC Form D filings and is often reported by financial media within days of closing. This is your ceiling, not your target.
Primary investors receive preferred shares. Preferred shares carry liquidation preferences, anti-dilution rights, and sometimes participating preferred provisions that common shareholders do not get. When you buy on the secondary market you are almost always acquiring common shares or common economic exposure through an SPV (special purpose vehicle). That structural difference alone justifies a discount — commonly called the common discount — relative to the preferred round price.
The size of the common discount depends on the company's liquidation preference stack and how far above the last preferred price a realistic exit needs to land before common shareholders participate meaningfully. For mature, late-stage companies where a sale or IPO price would likely clear multiple liquidation tiers, the discount narrows. For earlier-stage companies with heavy participation rights, it widens. A range of 10–35% below the last preferred price is typical across the market, though individual deals vary considerably.
Use revenue multiples as a cross-check
Many private companies have revenue figures that are either disclosed by management, leaked through press coverage, or estimable from job postings and product announcements. Even rough revenue estimates let you calculate an implied revenue multiple from the last primary round price.
You then compare that implied multiple to public comps — publicly traded companies in the same sector with similar growth profiles. If the private company's implied multiple is already at a significant premium to its public comp set, that is a signal the market has priced in aggressive growth expectations. Any shortfall relative to those expectations will compress the secondary price quickly.
The comparison is imperfect. Private companies do not have the liquidity discount, regulatory costs, or earnings pressure of a public company. Buyers routinely accept a premium for high-conviction private names. But that premium has limits, and knowing where your target sits relative to public peers is a useful guardrail.
Read the secondary market's own signals
The bid-ask spread visible on a secondary marketplace is itself a data point. A tight spread — where buyer bids and seller asks are within a few percent of each other — suggests the market has reached reasonable consensus on value. A wide spread suggests disagreement, often because a material event (a new primary round rumored, a strategic review, a regulatory headwind) has created uncertainty about which way price should move.
Volume and velocity matter too. A name where supply is thin and bids are accumulating signals buyer conviction outrunning seller willingness. A name where sellers are queuing faster than buyers are clearing signals the opposite. On our marketplace, listings refresh hourly, so tracking how supply moves over days gives a cleaner read on sentiment than a single snapshot.
Account for the time value of illiquidity
One cost that buyers sometimes underweight is the illiquidity premium — the additional return you should demand simply because you cannot exit easily. Secondary shares have no guaranteed liquidity event. A company can stay private for years beyond any expected timeline. Valuing that risk means asking: what return do I need, over what plausible holding period, to be compensated for locking up this capital?
This is not a formula with a universal answer, but working backward from your required return and a range of plausible exit multiples lets you calculate a maximum entry price that makes the position worthwhile. If the ask is above that maximum, the position does not work regardless of how attractive the company looks.
Putting it together: a practical sequence
- Locate the last primary round price from SEC Form D filings or credible press coverage. Note the date — anything older than 18 months deserves additional skepticism.
- Apply a common discount based on what you know about the company's capital structure. If you cannot read the cap table, ask the marketplace or selling party for the preference stack before committing.
- Pull three to five public comparables and calculate where the implied private valuation sits relative to their current revenue multiples. Adjust for private premium but flag any multiple that looks stretched.
- Check current secondary market activity: spread width, supply volume, and how quickly listings are clearing. These real-time signals refine your range.
- Calculate your own required return given a plausible exit range and holding period. Set a maximum entry price from that output. Do not exceed it because the seller is in a hurry.
None of this process eliminates risk. Private company investing carries the real possibility of a zero outcome. But a disciplined anchoring process separates buyers who are making a reasoned bet from those who are paying for excitement.
If you are ready to apply this to a live position, browse current listings on our marketplace — each name shows recent secondary marks alongside available supply, giving you a starting point for the analysis above.