Answer extracted from The Single Source podcast — listen to the full episode below.
How do secondary funds build shareholder relationships to negotiate late-stage deals?
Second Alpha Partners creates an annual curated list to identify target companies, then meets with CEOs to assess business plans and identify shareholders needing liquidity. They build relationships with selling shareholders by acquiring small stakes—typically 15 percent of seller ownership—at an average 60 percent discount to current market value, resulting in purchases of 10 to 15 million dollars per deal.
Identifying and targeting late-stage growth companies
The operational approach begins with systematic company identification. As Richard Brecka explains in the episode, Second Alpha Partners maintains a substantial AI database of private tech companies and S1 filings from the last 15 years to pattern match emerging companies against those that have already gone public. This data-driven foundation allows the fund to identify portfolio companies before they reach unicorn valuations.
Typical target companies have over 130 million dollars in annual revenue, sustain growth rates exceeding 35 percent, and are 10 to 12 years old. These characteristics identify mature late-stage businesses that have proven business models but whose shareholders may still lack liquidity options, making them ideal candidates for secondary transactions.
Building direct shareholder relationships through small-stake acquisitions
Once targets are identified, the fund engages directly with company leadership. Brecka's team meets with CEOs to understand operational dynamics, competitive positioning, and financial performance—gathering intelligence that informs shareholder conversations. This relationship-building phase is critical because it establishes trust before liquidity discussions begin.
The fund then approaches existing shareholders with offers to acquire roughly 15 percent of their holdings at significant discounts, typically around 60 percent below current market valuations. This structure benefits both parties: shareholders gain immediate liquidity at a reasonable price without waiting for a full exit, while the fund acquires proven growth assets at valuations unavailable through standard large block transactions. Individual transactions typically range from 10 to 15 million dollars in company stake.
"We're a value investor in high growth technology companies, a little bit of both."
Richard Brecka — CEO, Second Alpha Partners. Brecka has led Second Alpha for approximately 14 years, establishing the firm as a specialist in secondary linked investments across IT, media, and telecommunications in North America. His expertise centers on identifying and deploying capital in late-stage high-growth companies that fall below unicorn valuations, where he has built a proprietary data infrastructure to identify market inefficiencies and shareholder liquidity needs.
The specific mechanics of this approach—how Second Alpha Partners structures deal terms, navigates valuation disagreements with shareholders, and orchestrates due diligence at speed—are detailed further in the full podcast episode, which provides deeper operational context on secondary market dynamics.
See also
How do private equity firms use data and pattern matching to identify pre-unicorn investment opportunities?
Second Alpha Partners built a substantial AI database of all private tech companies and a database of all S1 filings from the last 15 years. They use this data as an inference model to pattern match private companies that resemble companies that filed S1s, enabling them to target investment opportunities before they reach unicorn status.
Where do market inefficiencies exist in private technology company valuations and liquidity distribution?
About 70 percent of value in private tech companies is concentrated in unicorns, while about 25 percent is in sub-unicorn companies where Second Alpha focuses. Yet 99 percent of liquidity in the marketplace goes to unicorns, while only 1 percent goes to pre-unicorn companies—creating a significant inefficiency.
What investment strategy do value-focused funds use to access late-stage high-growth technology companies at better valuations?
Second Alpha Partners uses secondary investments to enter late-stage companies at significantly better value. They target portfolio companies with over 130 million dollars in revenue and over 35 percent growth, providing liquidity to existing shareholders at attractive discounts.