Company quality, security rights, and position size should be read together rather than as separate decisions. Qualitative decision map. Positions are directional, and marker size does not represent measured data.
Co-Investment And Secondary Diligence
Company quality, security rights, and position size should be read together rather than as separate decisions.
View chart data and assumptions
| Item | Horizontal position | Vertical position |
|---|---|---|
| Access | Lower | Moderate |
| Company | Moderate | Higher |
| Security | Higher | Moderate |
| Net Outcome | Higher | Higher |
A Guide to Private Technology Co-Investments and Secondaries
Adams Street's co-investment overview explains how investors can invest alongside a lead private-market sponsor. Co-investments can give the investor a clearer view of the company, sponsor, terms, and fit with the rest of the portfolio. Co-investments and secondaries are ways to build a portfolio, not simply lists of additional risks.
Adams Street notes that co-investments often charge lower or reduced fees and carry compared with ordinary fund investments, although the terms vary by vehicle and relationship.
A co-investment and a secondary purchase can involve the same company but create different economic positions. New money may finance the business, while a secondary purchase pays an existing shareholder. The price, share class, information rights, and reason the transaction is available determine whether the two opportunities are truly comparable.
What Is a Venture-Capital Co-Investment?
A co-investment is an investment in a specific company, often made alongside a fund or another sponsor.
A $10 million co-investment alongside a $50 million commitment to a $500 million fund adds a separate company-level position equal to 20% of the original fund commitment.
The investor can evaluate a specific business before deciding. Price, security, and transaction terms are available for review. Company selection is no longer fully delegated to a pooled fund manager.
What Is a Private-Company Secondary?
Carta estimated $61.1 billion in VC secondary transactions for the 12 months ending June 2025, versus $58.8 billion in VC-backed IPO value.
A secondary transaction purchases existing shares or vehicle interests from a current holder rather than providing new capital to the company. Employees, founders, early investors, funds, or SPV holders. Rights of first refusal, company consent, or other approvals may apply. The next step is to understand why the holder wants liquidity at the proposed price and time.
Fund Investment Versus Co-Investment
- Fund investment: Provides portfolio exposure and delegates company selection, follow-on decisions, and much of the monitoring to the GP.
- Co-investment: Provides greater choice and a focused investment, with the investor accepting more responsibility for diligence, sizing, and monitoring.
Primary Versus Secondary Shares
In first-half 2025, Carta's median tender at Series C or later was $27.6 million in first-half 2025. That is a better example for later-stage co-investment scale.
In a primary financing, new capital goes to the company as part of a negotiated round. In a secondary sale, the purchase price goes to an existing holder. The two transactions may differ significantly in price, economic rights, information access, and the company's support for the transfer.
Benefits and Risks
Carta found only 44% of SPVs charge management fees, but among fee-charging vehicles the 2023 median was 1.9% and the 75th percentile was 2%.
| Potential Benefit | Institutional Control Point |
|---|---|
| An investment in a specific company | Position sizing, look-through exposure, and follow-on policy |
| Potential fee efficiency | Full gross-to-net model across SPV expenses, carry, and taxes |
| Strategic insight | Written separation of financial thesis and strategic rationale |
| Access to later-stage private companies | Information rights, transfer approvals, and realistic cash planning |
Review Company Quality and Entry Price
Start with the business, then connect company quality to the price being paid. Is the addressable opportunity attractive and defensible? Does the product solve an important problem? Before proceeding, the investor should review growth, retention, customer concentration, and repeatability.
Before proceeding, the investor should understand operating leverage, burn, runway, and likely financing requirements. Before proceeding, the investor should assess differentiation and the ability to sustain it. Before proceeding, the investor should identify plausible routes and timelines for liquidity. The entry price should leave room for an attractive net outcome after dilution, costs, and time.
Share Class, Preferences, and Rights
The buyer should understand what it will legally and economically own.
The decision depends on several practical questions. Who receives proceeds first in different exit scenarios? When can the security convert, and what decisions can the investor influence? What reporting and future participation are available?
The same review should cover these points. What restrictions or company purchase rights apply? Under what conditions can holders be required to sell? Must the issuer consent before the transfer closes?
SPV Fees and Layered Economics
Evaluate the full structure rather than the headline company price. Ongoing fees may apply at the vehicle level. The sponsor may receive a share of investment profits.
Transaction expenses can be real for smaller allocations. The vehicle or investor may face additional reporting and structuring issues. The goal is to know the fully loaded entry price before deciding whether the opportunity meets the investor's return threshold.
Family Offices and Strategic Investors
Different investors may use the same structure for different reasons. Family offices may build a focused investment around sectors where they have knowledge or conviction. Corporate and strategic investors may also seek market intelligence, commercial relationships, technology access, or venture partnerships. Those objectives should be documented clearly and should not replace financial rigor.
Deciding Whether the Transaction Belongs in the Portfolio
Frontierspace evaluates co-investments and secondaries by asking whether the business can support long-term ownership, whether the price leaves room for an attractive outcome, and whether the security provides the economic and governance rights the investor expects.
The sponsor, shareholder group, and incentives surrounding the transaction. Liquidity potential may involve realistic routes and timelines for realizing value. Materials are shared with qualified prospective investors only following review.
Databricks: equity, debt, liquidity, and strategic capital in one financing
Databricks closed a $10 billion Series J at a $62 billion valuation in January 2025 and added a $5.25 billion credit facility. Meta joined as a strategic investor.
The round included capital intended for employee liquidity as well as growth.
A bank-led credit facility sat alongside the equity financing.
Commercial and strategic interests could differ from those of financial investors.
A deal-specific review must identify exactly what the investor owns and where it sits. Equity price, tender allocation, debt claims, strategic rights, information access, and future financing needs are separate review questions.
Primary sources: Databricks, Series J and debt financing (2025). Publicly reported transaction evidence; not presented as a Frontierspace result.
Frequently Asked Questions
Are co-investments safer than fund investments?
They are different, not automatically safer: Co-investments can be attractive when the investor has the information, careful position sizing, and sponsor context to assess the specific transaction.
Why might a secondary be available?
Reasons vary: A seller may need ordinary liquidity, a fund may be managing duration, or a company may be organizing a tender process. Seller motivation should be understood, but availability alone is not a negative signal.
For deeper comparison, see co-investment vs fund investment and private technology secondaries.
Related Reading
Also see corporate strategic co-investments, and requesting access to private opportunities.