Also known as: secondary transaction, secondary liquidity

Secondary Sale

ConceptualFundraisingLegal

Definition

Secondary Sale: A secondary sale is when existing shareholders sell their shares to other investors, rather than the company issuing new shares. This provides liquidity to shareholders without diluting other owners. Common in late-stage companies before IPO.

Example Usage

“After five years, our early employees sold 20% of their vested shares in a secondary transaction.”

Common Misconceptions

Secondary sales give money to the company. The company receives nothing; sellers get the proceeds.

Only investors do secondaries. Founders and employees often sell in secondaries for liquidity.

Secondaries signal lack of confidence. They're often standard liquidity events in successful companies.

Related Terms

Exit

An exit is an event that allows startup investors and shareholders to convert their equity into cash. Common exits include acquisition by another comp...

FoundationalFundraisingFinance

Vesting

Vesting is the process by which employees earn their equity over time. The standard vesting schedule is 4 years with a 1-year cliff, meaning no equity...

ConceptualLegalOperations

Related Tools

Carta

Equity management and cap table software.

Forge Global

Private market trading platform for pre-IPO shares.

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Secondary Sale

Definition

Example Usage

Common Misconceptions

Related Terms

Exit

Vesting

Related Tools

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