There were some important IPOs that increased the rate of secondary adoption by investors and companies. When the IPOs did well and investors made money off their secondary purchases, they were more likely to go back into the secondary market and buy more private company shares.
In 2011, LinkedIn had a great IPO, and the investors who got in early were able to make a solid return. That success gave them the leverage to raise more money and invest it back into the private market. Similarly, Facebook and Twitter ran tender offers to provide employee liquidity ahead of their IPOs in 2012 and 2013 respectively.
More recently, Alibaba as the world’s largest tech IPO had a similar effect on the private market. Prior to the IPO, Alibaba had been a highly sought after stock on the private market. Alibaba’s success at IPO reaffirmed the model.
Of course, the IPO market has not been all positive for investors in the secondary market. The disappointing performances of Groupon and Zynga have both been cautionary tales for private-market investors that never had the opportunity to get liquidity at a higher price. The early days of secondary trading also attracted some bad actors. The cases of Advanced Equities and Ventures Trust II are cautionary tales that caused the SEC and FINRA to really step in and take control of the market. Companies also began to take a closer look at who was buying their stock and think more strategically about how they allow liquidity to their shareholders.