Creating a $140B market: The secondary market masterclass - Larry Aschebrook [G Squared]

Larry Aschebrook Built a $140bn Secondary Market

Larry Aschebrook built G Squared around employees at hot private companies who held valuable shares they could not sell, while institutions stayed away. He turned that gap into a $5bn firm and helped create a $140bn annual secondary market. The business underwrites like a primary investor and partners with issuers, while returning cash quickly. It demands concentration and tolerance for losses.

Takeaways

• Aschebrook built a secondary market from scratch. He cold-called employees at Twitter, Palantir, Spotify and Uber using alumni lists from five universities. Secondaries were taboo and reserved for fund stakes and large buyout deals. G Squared now manages $5bn and the market trades about $140bn a year.
• G Squared underwrites secondaries like a primary investor. The price of admission is data to understand the business and connectivity with management. G Squared partners with issuers so they can stay private longer and get cap table access. Early deals were mosaic theory, but the toolkit was built over fifteen years.
• Cash-in, cash-out model keeps DPI high. G Squared sends cash to LPs after a company goes public and slowly exits once the company no longer needs support. The DPI north star is a two-and-a-half to three times return in five to seven years, with 30% plus realized IRRs.
• Concentration creates wins and painful losses. Ten companies make up 80 to 90% of risk in G Squared funds, and top positions can reach $200m to $300m cost basis. Wins include Spotify, Coursera, Toast, Wiz, Anthropic and OpenAI. Losses include Uber, Gorillas, Getir, Pagaya and quick commerce.
• Large private companies can stay private longer. Stripe and Revolut can remain private because public markets lack liquidity for large positions, and G Squared supports issuers staying private. Databricks can also stay private. Aschebrook expects an exchange for private securities to evolve.
• AI winners may still be in infancy. Aschebrook says Anthropic and OpenAI are probably still in their infancy, and most people who got in at the right time will have a fantastic outcome. He underwrites AI valuations by asking what growth investors are paying for tomorrow and whether access exists.

The Spotify block

1. After a notice to Spotify went unanswered, Aschebrook flew to Stockholm and camped in the lobby until a legal officer invited him in.
2. He put a sign in the break room offering to buy shares, and Spotify sent a $150m block from a Nordic venture firm.
3. G Squared raised $141m in the sixty-day Luxembourg settlement window and was $9m short.
4. Aschebrook backfilled the gap with a personal loan, with nothing to back up the loan.