Insights

The anatomy of a Web3 secondary deal in six steps

Secondary deals in Web3 are no longer backroom trades, they’ve become essential tools for fund managers, founders, and family offices seeking liquidity or access. But with volatility, regulatory gaps, and fragmented infrastructure, executing them well takes more than just a buyer and a wallet.

Smart moves start with sharp insight – so let’s outline the secondary market process step-by-step. This guide breaks down the six stages of a Web3 secondary transaction, from origination to post-trade servicing, outlining the risks, nuances, and institutional best practices at every step, while highlighting the particular pitfalls involved in making these deals in Web3 and what every fund manager must be aware of.

Step 1: Order intake and origination

All deals start with intent. Funds identify an asset before they have full visibility into the cap table. They signal their interest, be it through a broker network, market platform or by sliding into a founder’s DMs – and then the work begins. It’s not just a matter of how much or at the right price, it’s about due diligence, lock-up considerations, liquidation restrictions, deal privacy, and all terms around the SAFT/SAFE or equity they acquire.

In Web3, secondary deals often involve tokens that are still subject to lock-ups, vesting schedules, or transfer restrictions, whether originally allocated at the TGE or held by early investors, advisors, or team members. These constraints introduce real complexity. Investors aren’t just acquiring tokens; they’re acquiring time-bound rights that depend on project-specific mechanics, legal terms, and smart contract conditions. To add to that, the way these deals are structured and communicated can impact how they’re perceived by the broader community. Getting the terms right isn’t just about compliance, it’s also about transparency and trust. But no matter how promising a deal looks, nothing moves forward until due diligence is complete because if a deal is too good to be true, it probably is.

Step 2: Onboarding and due diligence

Compliance is not optional. Funds must be able to demonstrate to clients and jurisdictions that their investments are above board. KYC, AML and accreditation checks must be carried out and, in an international market with tokens and data moving across borders, the headache is sharper still.

When investing in Web3, due diligence in asset verification is a must. Confirming precise ownership and that the seller can actually sell is complex, especially with the potential of smart contracts limiting potential transfers. Projects all have unique roadmaps that often include how and when the tokens that fuel their protocols will be released, with limitations that aren’t just theoretical but also technical.

No matter how promising a deal looks, nothing moves forward until thorough due diligence is complete.

Working with reliable secondary market partners enables you to conduct due diligence, confirming ownership, source of funds, vesting, transfer limitations, and draft bespoke purchase agreements with legal counsel from all parties involved.

Step 3: Matchmaking and counterparty discovery

With due diligence complete and the order defined, the next step is finding the right match.

A fundamental inspiration behind the creation of Bitcoin was counterparty risk. Ensuring you get what you paid for, or are paid for what you sell, is the raison d’être of most financial institutions in the first place.

While on-chain architecture may reduce that risk, when moving real capital into Web3 protocols, the spectre of it still lingers. It’s a challenge to find qualified, verified buyers and sellers for any asset at scale, especially low liquidity cryptos and varying procedures & cultural differences across the US, UK, and Middle East. The fact the space is populated with pseudo-anonymous entities only makes it trickier.

That’s where we come in. We don’t introduce parties until there’s alignment on price and terms. Matchmaking happens on our side, through direct conversations with verified buyers and sellers, not through endless broker chains. It’s not just about who wants the deal, it’s about who can actually close it.

Confidentiality is essential. In Web3, even the hint of a large transaction can move markets. That’s why strict discretion is central to preserving deal value and trust across the table.

Step 4: Price negotiation and deal structuring

Even when the match is right, nothing is agreed until everything is agreed. Nowhere is this more true than when it comes to price. Pricing assets comes with the added nuance of an occasionally hyper-volatile market, where the market price for a particular asset can crumble or soar through no fault or virtue of its own due to wider market conditions.

Nothing is agreed until everything is agreed, and nowhere is this more true than when pricing assets in a hyper-volatile market.

Each basis point counts, and the way the deal prices are defined is ever-changing. From simple discounts to market on a stable asset to TWAPs, or 7-day moving average prices, forming a deal that accounts for volatility, token lock-ups, asset transfer timings, premiums/discounts, and the inherent agreement on an asset’s fundamentals is vital to deals where all parties become future partners.

It’s not only key to align incentives between the buyer and seller, but also to consider the community’s and Foundations interest, since too much opaqueness in badly-structured deals affects everyone from the get-go. That’s why deal terms must be watertight and grounded in reality. Legal agreements need to reflect not just what’s on paper, but what’s technically possible and aligned with how the project is governed.

Step 5: Settlement and closing

Even after a deal is inked, the legalities finalised and formalised, and everyone is ready to proceed, there are still hurdles to overcome. All blockchain transfers are final – synchronizing payment and asset transfer is a major consideration when large capital investments are made. Managing gas fees, on-chain confirmation times, and smart contract risk is also vital for smooth deals.

There are regulated custodial services for Web3, such as BitGo, Anchorage, or Fireblocks, which help smooth this process – and working in tandem with these organizations is an important part of making deals proceed and remain secure post-transfer. Often, crypto-native buyers and sellers will use on-chain payment mechanisms like stablecoins, which can be a novel challenge for traditional investment firms which prefer fiat rails.

Secondary market partners also assure secure, private, off-chain deals, where the assets never switch hands on-chain, but rather ownership of the wallet are exchanged as part of a binding contract and via a multisig set up. Appropriate checks and balances on these types of transactions and how they are handled is a Web3 nuance that we are experts in handling.

Step 6: Post-trade: reassignment and asset servicing

Once a deal is done, the corks popped and the asset added to a burgeoning and successful portfolio – it’s still not the end of the process. After-deal care is worth considering too – be it updating official records, notifying relevant parties, updating cap tables, or ensuring transfer finality in the designated account.

With periodic vesting structures being the norm, ensuring that these commitments are honoured either through smart contracts or manual transfers, and guaranteeing the legalese behind any deal remains watertight. For those new to Web3, effective tracking of transfers, periodic reporting on the status of upcoming disbursements, translating blockchain data, and the communication of investor updates are key steps in maintaining a healthy relationship – we’re here to make sure that information is delivered clearly and appropriately even if it takes us years.

The heart and head of the deal

Web3 is a market filled with nuance, novel risk, and unique but exciting practices. Successful secondary deals require more than capital. They demand deep expertise, strong counterparties, and adaptable infrastructure. Only then can trust be built in trustless markets, and can win-win specialist deals be obtained for angels, founders, family offices, and VCs.