Secondary Sales: Selling Founder Shares Before IPO
Written by Aparna Devalla, CPA
Curated by Rubric Financial
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What a Secondary Sale Is
- A secondary sale is the sale of EXISTING founder/employee/early-investor shares, typically to a new or existing institutional investor, separate from a primary fundraise where new shares are issued for cash to the company.
- Mechanism: shares change hands between holders; the company receives no cash. The transaction is between the seller and the buyer.
- Most common at Series B-D rounds. New investors may purchase $5-25M of secondary shares from founders/early employees as part of a larger primary round ($30-100M+).
- Structures range from formal tender offers (everyone with vested shares can sell a pro-rata portion) to negotiated bilateral deals between specific shareholders and a fund.
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