137 Ventures' Christian Garrett on secondary markets, transfer restrictions, and why SpaceX runs $1.5B+ in annual tenders
Mar 25, 2025 with Christian Garrett
Key Points
- SpaceX runs two annual tender offers totaling $1.5 billion despite raising only $10 million in primary capital over 23 years, demonstrating how late-stage private companies use secondary markets for valuation marks and employee tax liquidity instead of traditional fundraising.
- Transfer restrictions on private company shares became standard after Facebook's pre-IPO cap table lost investor control to outside buyers, a dynamic that now forces all major venture-backed companies to run controlled secondary processes with known investors rather than open markets.
- The secondary market operates on relationships, not software: institutional investors and top companies avoid social media broker lists due to fraud risk and information asymmetries, leaving the transaction business to direct firm engagement despite Carta's failed attempt at scaling it through technology.
Summary
Christian Garrett, partner at 137 Ventures, argues that the secondary market for private tech equity has moved from contrarian bet to standard infrastructure. The firms winning in it compete on relationships, not software.
137 Ventures spun out of Founders Fund and built its strategy on the thesis that companies would stay private longer and demand for liquidity would grow. That thesis is now consensus. The firm operates as a liquidity partner to companies directly, working within their cap table processes rather than buying shares on the open secondary market.
SpaceX as the model
SpaceX illustrates where this market has gone. The company has raised only $10 million in primary capital over its 23-year life, yet runs two tender offers annually that total more than $1.5 billion a year. Those tenders are oversubscribed by 10x, meaning billions of dollars of demand chasing limited supply. Stripe, Databricks, Applied Intuition, and OpenAI are building similar programs.
The driver isn't just employee liquidity. Cash-flow-positive companies no longer need primary rounds to mark up their valuation, so tenders serve that function. Single-trigger RSU structures also force some companies to run them to cover employee tax bills. Databricks' recent large round was partly structured for exactly that purpose.
Transfer restrictions and cap table control
Facebook set the precedent for transfer restrictions. Before Facebook, a right of first refusal was enough to deter random buyers. But Facebook's consumer scale pushed its private valuation into the tens of billions before most venture firms had the capital to exercise that right at volume. The company lost cap table control as outside buyers absorbed shares that existing investors couldn't afford to block. Every major venture-backed company implemented blanket transfer restrictions after that, and those have been the default since. Without restrictions, a competitor like Yahoo or Google could theoretically have accumulated a meaningful secondary position in Facebook and gained leverage.
The informal broker market
The lists of hot secondary names circulating on social media are mostly noise. They reflect uninformed buyers and uninformed sellers, and often represent brokers advertising access they may or may not actually have. The best companies don't engage with that segment of the market, and institutional investors don't either. Operating outside company-sanctioned processes means no information rights, no collaboration with the company, and real fraud risk. Andreessen Horowitz has issued public warnings about fake allocations being marketed to investors.
Carta's exit from its secondary brokerage business reinforces the point. Software can manage cap table administration, but the actual transaction business keeps reverting to a relationship model. The best companies have unlimited demand, which means they don't need a broad market for price discovery. They run controlled processes with known investors instead.
Founder liquidity signals
Founder secondary deals read differently depending on two variables: percentage of holdings and total dollar size. Selling $100 million that represents 5% of a position reads very differently from selling $5 million that is 50% of holdings. The 2021–22 cycle produced the worst version of this, with founders selling $50 million pre-product market fit. In practice, most founder secondary is driven by life events such as buying a house or starting a family, which naturally constrains the size and makes the conversation straightforward. Founders are typically the most bullish holders in the company, so the desire to sell is generally limited.