The secondary market is filling a funding gap and changing Indian venture capital for the better

An opinion column by the MD of Lightspeed, India argues that the private secondary market is becoming a meaningful third exit route for Indian venture capital, alongside IPOs and trade sales. A venture fund's returns and its ability to raise successor funds depend on exits, and for most of India's startup history an IPO was effectively the only option.

The writer notes that India has never been a large M&A market. While strategic sales rose sharply in 2025 and crossed $1 bn, they started from about $65 mn in 2024. By comparison, US venture-backed companies saw about 1,000 acquisitions against 48 public listings in 2025. Acquisitions are only becoming viable as Indian startups grow large enough to buy others, with Zomato's purchase of Blinkit and Groww's purchase of Fisdom cited as examples. Early-stage investors therefore cannot yet count on an acquisition as a reliable exit.

Public markets have carried most of the load. Indian IPOs raised a record ₹1.95 tn (about $23 bn) in 2025, up from about ₹1.6 tn in 2024. However, the column says public investors increasingly reward scale, governance and visible earnings, and issues above $100 mn accounted for nearly 90% of venture exit value in 2025. A company several years from listing may still have early investors who need to return capital to their own backers, which is the gap secondaries address. In a secondary transaction, an existing shareholder sells to an existing or new investor without fresh capital entering the company.

The column says the secondary market is not yet as deep as the IPO market but is increasingly linked to it. Globally, secondary transaction volume reached a record $240 bn in 2025. Much Indian activity now takes place after listing, in block trades, where public funds that have tracked a business for two to three years are natural buyers.

Three changes are cited as enabling this development. First, the buyer base has broadened from US hedge funds and crossover investors in 2020 and 2021 to sovereign funds, PE growth arms, domestic institutions, family offices and dedicated secondary funds. Second, founders have become more receptive to early investors selling, though the process still requires full diligence and coordinated action by sellers. Third, a strong IPO record lets secondary buyers underwrite a listing three to four years out, looking for market leadership, large addressable markets and near-profitability. The writer adds that an Indian fund typically holds four to five assets of scale, and only a handful of buyers exist for such packages, so discounts are steep and sales take most of a year. The column concludes that secondaries do not replace public markets but prepare companies for listing with long-term shareholders.