The Art Behind the Number

June 2026 | PrePublic Equity Partners

Every few months at PEP name comes through that the rest of the market has not yet priced correctly yet. By the time everyone agrees it’s a great company, the price has already moved past the point where it’s a great deal. The window between those two moments is where the actual work happens, and it has less to do with access than you might think (access, after all, is at premium when “everyone” wants into the deal).

We invested in one of those names earlier this year. It’s since become one of the more sought-after secondary tickets in the market, with inbound interest now outpacing available supply by a wide margin. Plenty of buyers had the same access we did at that time. What separated our entry from the more expensive one available today was research into how the price was actually constructed, not just research into the company. Most buyers stop at evaluating the business. Few go further and evaluate the mark they’re being quoted on it, and that second layer of diligence is usually what separates an opportunity from an attractive one.

As in any market, we know why sellers participate: liquidity. Founders, employees, and early investors want to realize value before a public exit, and buyers want exposure to great companies without waiting for that exit. Every deal in this market sits on top of that need. The real question is whether the price on offer turns that liquidity need into a good deal for both sides, or just a fast one for the seller.

The signal stack

A credible secondary mark draws on some combination of four inputs, roughly in order of how much weight each deserves.

Closed deals. Actual executed transactions, with a real buyer, a real seller, and a price that cleared. This is the only input that reflects a true market clearing price rather than someone’s opinion of one. The catch is recency and volume. A closed deal from four months ago in a fast-moving company tells you less than a closed deal from last week, and most private names simply don’t generate enough transactions to build a clean curve. The closed-deal history on the company we entered was thin enough that most buyers were anchoring to the wrong reference point entirely. That gap is what we underwrote.

Bids and offers. Indications of interest sitting on a platform’s order book. Useful for direction, dangerous if treated as price discovery. A bid tells you what someone will pay, not what a seller will accept, and the spread between the two in illiquid names can be enormous. We’ve seen 25 to 40 percent spreads between best bid and best offer, where the “headline price” quoted to a buyer was really just the most recent offer with no actual buyer behind it.

Round marks. The price implied by the company’s last priced primary round. Everyone defaults to this because it’s clean, it’s semi-public, and it requires no real work. It’s also frequently stale. A round priced 18 months ago, in a different rate environment and a different growth trajectory, isn’t a current valuation. It’s a historical data point standing in for one, and stale round marks are usually where the mispricing hides.

Platform marks. Each marketplace builds its own internal estimate, generally a blend of the three inputs above plus proprietary weighting. This is where the real divergence between platforms comes from. Two platforms looking at the same closed deals and the same round history can land on different marks simply because they weight recency and staleness differently. Knowing which question a given platform’s mark is actually answering is part of the work.

Layer 1 (L1), Layer 2 (L2), and the layer most people skip

Beyond the marks themselves, there’s a structural piece almost nobody outside the industry talks about: what layer of the cap table you’re actually buying into.

L1 is direct exposure, a share or unit that traces back to an actual position on the cap table, usually through a direct transfer or an SPV holding the shares outright. L2 is a fund or vehicle that holds an L1 position, where you’re buying a slice of the vehicle rather than the underlying shares. Each layer added means more fee drag (whether embedded or layered), another GP making decisions on your behalf, and a longer chain between you and the company. A 33 percent discount to the last round can look very different once a platform fee, a carry structure, and two or three degrees of separation from real information rights are netted out. Part of why our entry held up is that we underwrote the actual layer we were buying, not just the headline discount attached to it.

Underwriting is a judgment call, not a spreadsheet

It would be convenient if all four of those signals fed into a model and produced a defensible price. In this market, often they don’t. Closed deals can be too sparse, bids and offers too noisy, round marks too stale, and platform marks built on assumptions you can’t fully see from outside. At some point the inputs run out, and what’s left is judgment calls that forecast plausible future performance scenarios based on the best data you can access and the best comps you can find. 

That judgment isn’t about chasing the lowest number on offer. It’s about deciding what return makes sense for the risk being taken, and whether the deal in front of you is structured to actually deliver that return once fees, vehicle layers, and time to liquidity are accounted for. Unlike early stage venture or public markets, the late stage venture secondaries market can offer two deals in the same company, at the same headline discount can be entirely different opportunities depending on the exit path, the seller’s motivation, and how much of the signal stack is actually trustworthy. A model can tell you the inputs. It can’t tell you which deal structure actually works, and that’s where the art comes in.

Scarcity isn’t the same as quality

The other variable that gets misread constantly is access scarcity. A name that’s hard to source isn’t automatically a name worth sourcing. Scarcity drives urgency, and urgency is exactly the condition under which buyers skip diligence. The companies with the thinnest secondary float are often thin because employee sellers are concentrated around a single liquidity window, not because buyer demand is unusually high. Reading scarcity as a quality signal rather than a supply artifact is one of the more common ways buyers talk themselves into a weak price, usually right before everyone else shows up and moves the price against them.

Where research fits

Before any allocation, we want to know which layer of the signal stack the quoted price is actually anchored to, whether there’s been a real closed transaction recently enough to trust, what the bid-offer spread looks like where it’s visible, how stale the last round mark is relative to current growth and burn, and which layer of the cap table is actually on offer. That last question alone changes the real economics of a deal more than most buyers expect.

The deal we got into is a useful example mostly because it’s no longer available at that price. Once a name becomes visibly scarce, every buyer in the market starts running the same surface-level analysis, and the gap closes fast. Good entries in this market don’t come from better access. They come from doing the pricing work, and the judgment work, early enough to get a great company at a good price before the rest of the market catches up.

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RESEARCH DISCLOSURE This article is for informational and educational purposes only. It represents independent thematic analysis prepared by PrePublic Equity Partners ("PEP") and is intended to discuss industry trends and company dynamics in the private markets. This content does not constitute investment advice, a recommendation, or a solicitation to buy or sell any security or investment product. PEP is not a registered investment adviser or broker-dealer. Any offer or solicitation relating to securities will be made only through definitive offering documents to eligible investors. PEP and its affiliates may hold financial interests in companies discussed herein and reserve the right to trade such positions at any time without notice. Private market investing involves significant risk, including illiquidity and potential loss of principal. All data is sourced from publicly available information and has not been independently verified.

IMPORTANT DISCLOSURE This content is published by PrePublic Equity Partners ("PEP") for informational and educational purposes only. It does not constitute an offer to sell, or solicitation of an offer to buy, any security. No such offer or solicitation is made except by means of a confidential Private Placement Memorandum or other definitive offering documents delivered to eligible investors only. PEP is not a registered investment adviser with the SEC or any state securities regulator. Nothing in this article should be construed as personalized investment, financial, legal, or tax advice. All views are the opinions of the author as of the date of publication and are subject to change without notice. Private market and pre-IPO investing involves a high degree of risk, including illiquidity, potential total loss of principal, and reliance on unverified private company data. Past analytical observations are not indicative of future results. PEP and its affiliates, officers, or employees may hold financial interests in companies discussed in this article. PEP reserves the right to buy or sell such positions at any time without notice. PEP does not receive compensation from issuers mentioned in its research. PEP is an independently operated subsidiary of Alumni Ventures, LLC.