When shareholders of private, venture-backed companies such as employees, ex-employees, or early investors want to transfer ownership of their shares to another investor in exchange for liquid assets, this is done on the private secondary market.

The proceeds of the sale go to the shareholder, and the new investor takes the place of the original one. Essentially the shares bought and sold are from what is known as a primary issuance. When a company issues shares granted to employees, generally as options that contribute to their compensation, or alternatively sells those shares to early investors to raise capital, this is called a primary issuance.

These employees or investors can sell these shares in the secondary market, called secondaries. The name comes from the fact that they are one step removed from the primary issuer (the employee or early investor).