Europe’s venture capital market is facing a prolonged liquidity crunch. As many funds approach the end of their lifecycle, GPs are under pressure to show real returns rather than paper valuations. Against that backdrop, the secondary market, which long has been treated as a niche corner of private capital, is now drawing increased attention.
Few people are as closely associated with that shift in Europe as Rando Rannus, GP at Siena Secondary Fund, one of the continent’s earliest and most active dedicated secondary vehicles. The fund has built positions in companies including Bolt, Booksy, Oura, Veriff, and Preply, and has secured backing from government agencies such as EBRD and Estonia’s SmartCap.
In a conversation with Vestbee, Rannus discusses the evolution of Europe’s secondary market, why more venture firms are seeking liquidity solutions, and how he sees the market's future.
How did you end up in the Sienna Secondary Fund, and what has your experience been like in the VC market?
I’m a founder by background. After my exit, I transitioned into mentoring and angel investing, eventually meeting my partner at the Estonian Business Angel Network. We saw a clear gap in the market: while Estonia was minting unicorns at a high rate, entering those scaleups was nearly impossible because cap tables were full and ticket sizes were huge.
Meanwhile, the early stage was becoming oversaturated with international VCs and local "mafias", like from Wise and Pipedrive. The real opportunity revealed itself when fellow investors began seeking partial liquidity.
In 2018, we executed Estonia's first-ever secondary deal. It was a syndicate-style hustle, but it proved the demand for liquidity was there, not just in Estonia, but across the Nordics and the broader CEE region.
Today, that strategy has landed us in top-tier names like Booksy and Oura, with performance currently in the top decile.
How has the secondary market evolved since you started? Is it still a niche, and is Estonia uniquely positioned for these kinds of institutions?
I wouldn't say Estonia is uniquely positioned, but the market has definitely matured. When we launched, we had to explain what "secondary" meant. Now, it’s understood. Globally, the stigma has faded — ten years ago, a founder selling shares was seen as a bad sign, but today it’s considered healthy. In the US, names like SpaceX and OpenAI drive massive trading volumes.
Europe is harder to track because many "European" startups are actually headquartered in the US for commercial reasons, but the growth is undeniable.
Do you see the same potential specifically within Central and Eastern Europe?
Definitely. We are still far behind the US, where you have specialized funds, brokers, and platforms like Forge Global. In Europe, there are only a handful of players like us. I don’t even see other European secondary funds as competitors; I see them as partners. The opportunity is so large that there is room for everyone.
Thus, our long list currently has about 250 names. And of those, perhaps 50 or 60 are truly interesting. There are enough companies to create a strong market.
How has the perception of secondaries changed for GPs and LPs?
The attitude of GPs has shifted significantly. It used to be a "hold until the end" mentality. Now, because the IPO and M&A markets are slower, GPs realize they need to actively manage their portfolios to provide DPI for their LPs. The best GPs understand this.
For example, Credo sold a portion of its stake in ElevenLabs after it hit unicorn status. You could say that they left so much money on the table because ElevenLabs at the moment is valued at like $11 billion, but they did the job for the LPs. They returned capital while maintaining significant upside. LPs really appreciate seeing those actual distributions.
For your second fund, you brought in institutional investors like the EBRD and Estonia’s SmartCap. What was that process like, and how do regional institutions view secondaries today?
We had to break a glass ceiling in the sense that, before us, no fund had ever raised a specialized secondary strategy from the EIF, the EBRD, or any national fund. The EIF still doesn’t actually support secondaries directly; their mandate focuses on the early stages where firms do primary investments. Those firms can do secondaries, but it's usually limited to 10% or 15% of their capital.
The EBRD, on the other hand, isn't focused solely on job creation; their mission is also to develop capital markets. They often participate as leading investors in IPOs, so they understand that market liquidity is essential. They analyzed our case from many angles. The process took two years, but eventually, they saw the need and were ready to pursue it.
It was the same with the Estonian government. We had to explain what we deliver and why it’s necessary — to show that this isn't just money leaving the system so people can buy Ferraris and apartments. We used data from Fund I to show that most of the money actually flows back into the ecosystem. The people selling were becoming angel investors, investing in other funds, launching their own startups, or becoming GPs themselves.
Our data showed that 70% of the people we transacted with reinvested back into the ecosystem. That is a significant figure that demonstrates real impact.
You’ve mentioned that cashing out early employees turns them into the next generation of founders.
Exactly. We have an interview on our website with an early Veriff employee who used his proceeds to bootstrap a new startup. There are many similar cases.
There are limited buyers for existing shares. How do you see this gap today, and how do you think it shapes the demand for secondaries?
There are two markets. You have high-profile superstars — names like Anthropic, OpenAI, or SpaceX in the US, or Eleven Labs in Europe. Then there is the other 99.9% of the market where it’s very hard to find a buyer. You have to be proactive because there are usually far more sellers than buyers. That’s why the opportunity in Europe is so massive.
So, how do you find the buyers for that 99.9% of the market?
It depends on the stage. For a Series A company with mediocre growth, liquidity is tough- you can most likely only sell to existing shareholders within the cap table. But for true scaleups with tens of millions in revenue and 50% year-over-year growth, there is always demand. You can always go to secondary funds like us or others, or talk with brokers.
Of course, once you reach Series B or C, there might be a separate component for secondaries included in the fundraise, and then the liquidity comes from there. That’s usually the easiest path if the company is doing well.
What signals tell you a company is ready for a secondary deal rather than just someone trying to offload a bad asset?
We look for specific criteria: at least €10 million in revenue, 50%+ growth, a €100 million+ valuation, and a 3-to-5-year exit horizon. We also look at the investor base and exit preparations. We might say no if there’s a high preference stack that would wash out the proceeds in an exit, or if the finances of a bootstrapped company aren't transparent enough. Since we don’t take board seats, we have to be very sure about who the eventual exit buyer will be.
When a GP sells, how do you distinguish between healthy liquidity management and a negative signal about the asset?
It comes down to whether the asset is a "trophy" or not. In the past, GPs often tried to sell off "leftovers" — the underperformers. We focus exclusively on the best of the best. If a GP is offering something outside of their top tier, we aren't interested.
You have to understand the motivation. A healthy motivation, which is becoming common, is a GP selling to show DPI to their LPs to help fundraise for their next fund. That is a positive signal. However, if a GP has already exited 80% of their portfolio and is trying to offload the final few companies they couldn't sell, I wouldn't buy those.
You focus on growth-stage companies like Bolt or Booksy. What have you learned from your portfolio so far, and how does secondary performance compare to traditional VC?
One major lesson has been to pay much closer attention to the preference stack and a company’s capital requirements. This is related to what we talked about regarding 2021. Some companies were in a growth mode where they had to keep raising capital and couldn't pivot to profitability fast enough, which hurt earlier investors.
This is something we are now trying to understand and look at: in the companies we invest in, how could negative scenarios play out? What is the probability of those? I think we are putting more attention on that part now.
You’ve invested in Bolt several times over the years. How do you decide whether to double down on a company or diversify?
With Bolt, we have actually invested almost every year through different vehicles, including co-investment vehicles, set up in parallel to the main fund. The reasoning is that we have quite good visibility on the secondary market pricing, and over the years, we have monitored the pricing of public market competitors. If there is a block of shares available at a really good price level, we offer it and go after it.
The logic is always the same: we look at the price level, the potential exit, when it might happen, and the potential return.
What trends do you think will define the secondary market over the next few years? Right now, it feels like so many funds are looking for liquidity because they are nearing the end of their investment periods.
Let’s be honest: 80% of the funds created in recent years will die out. That’s healthy. In Poland, for example, the PFR mechanism helped create a hundred different funds; it is only logical that only a handful will stay relevant. If you haven’t invested in an outlier company, finding a buyer for your positions will be tough. We are seeing a purge, which is just part of the VC lifecycle.
Overall, secondaries are becoming normal. It’s no longer a "hideaway" strategy; it’s a healthy conversation between founders, GPs, and buyers. Global secondary volume is now on par with IPOs and M&As in terms of the liquidity it creates.
We should also mention the impact of massive secondaries like SpaceX, Anthropic, and OpenAI. We are looking at a combined valuation of $3 trillion plus. If even 5% of those shareholders cash out, that puts $150 to $200 billion of liquidity back into the market.
We haven’t seen this level of liquidity in a long time. Pitchbook data shows that the SpaceX secondary volume alone is comparable to the total IPO volume of the last ten years. When that money flows back into investors' wallets, they will reinvest it into new funds and startups. This could push the entire cycle to the next level.
Do you think these massive deals are outliers, or do they set a new precedent?
They are the outliers of the moment. Venture-level returns are getting harder to find, but when a new outlier does emerge, the returns are phenomenal.
It might not be AI next time; it could be space tech, robotics, or something like Waymo in the autonomous vehicle space. It will likely come from an up-and-coming industry we aren't currently focused on.
