Secondary Sales

Extracted Attributes

• Purpose

  Provides liquidity to existing stockholders (investors, employees) in private companies by allowing them to sell shares before a traditional exit event like an acquisition or IPO.

• Benefits

  Liquidity for investors/employees, VCs can recycle capital, LPs can exit early or reallocate capital, can enhance long-term returns for funds.

• Common in

  Private companies and startups.

• Definition

  The financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold, distinct from the primary market where securities are first sold by the issuer.

• Market Type

  Secondary market (also called aftermarket or follow on public offering).

• Recipient of Proceeds

  The existing stockholder (seller), not the issuing company.

• Types of Transactions

  LP-led, GP-led, and continuation vehicle secondaries.

• Restrictions/Considerations

  May be subject to rights of first refusal, company board consent, can affect employee option exercise prices, raises concerns under securities, tax, and antitrust laws.

Timeline

• The All-In Podcast highlighted Sequoia's novel use of secondary sales to offer liquidity on its investment in Stripe, noting it as a positive trend toward more Venture Capital Exits. This discussion occurred around the time of the Republican National Convention (July 15-18, 2024) and a Trump assassination attempt (July 13, 2024), which were also topics of the episode. (Source: Related Document fad27814-4fde-4a37-810c-0a85edbfd192)

  2024-07-18

Secondary market

The secondary market, also called the aftermarket and follow on public offering, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. The initial sale of the security by the issuer to a purchaser, who pays proceeds to the issuer, is the primary market. All sales after the initial sale of the security are sales in the secondary market. Whereas the term primary market refers to the market for new issues of securities, and "[a] market is primary if the proceeds of sales go to the issuer of the securities sold," the secondary market in contrast is the market created by the later trading of such securities. With primary issuances of securities or financial instruments (the primary market), often an underwriter purchases these securities directly from issuers, such as corporations issuing shares in an initial public offering (IPO) or private placement. Then the underwriter re-sells the securities to other buyers, in what is referred to as a secondary market or aftermarket (or a buyer in contrast may buy directly from the federal government, in the case of a government issuing treasuries).

Web Search Results

• Definition of Secondary Sale - Cooley GO

  A secondary sale is the sale by an existing stockholder of shares in a private company to a third party that does not occur in connection with an acquisition of the company. When a lot of secondary sales happen together as part of the same transaction, it is sometimes referred to as a liquidity round. A secondary sale may be subject to various restrictions, such as rights of first refusal held by the company or by investors, and many companies have implemented a general prohibition on secondary [...] Secondary sales can affect the option exercise price used for employee options, and can also raise concerns under securities, tax and antitrust laws. It is generally a good idea to have company counsel review any proposed secondary sale paperwork, even if the company is not going to be a party to the agreement. Related Articles: [...] sales to third parties without board consent.

• A Guide to Secondary Sales - Sydecar

  Secondary sales allow investors to buy or sell startup equity outside of a traditional exit, offering liquidity in an otherwise illiquid asset class. The market has evolved from a niche option to a core liquidity strategy, with LP-led, GP-led, and continuation vehicle secondaries all gaining traction. These transactions benefit both buyers and sellers, enabling VCs to recycle capital and LPs to exit early or reallocate capital across portfolios. [...] ## What is a Secondary Transaction? In the private markets, a secondary sale is any sale of ownership in a startup (typically common or preferred stock) where the seller is anyone other than the company itself. For instance, an investor may purchase Series Seed stock and then resell it to another investor several years down the line prior to the company going public or getting acquired (known as “exiting”). ## A Brief History [...] Secondary sales can also allow VCs to recycle capital back into a fund. Instead of returning funds to LPs immediately, proceeds from exits or secondary sales are reinvested into additional companies. For LPs not needing early liquidity, this recycling can enhance long-term returns by deploying more capital into investments. It also improves fund metrics like IRR and total value paid in (TVPI), aiding in future fundraising efforts. This post by Sapphire Ventures provides an in-depth example of

• What Is a Secondary Sale? Risks and Challenges - PayPro Global

  A secondary sale is the process of selling shares by existing stakeholders in a private business organization before the company’s IPO or acquisition. Investors and employees of a start-up can sell their stocks to convert them into cash. The process manages money or expands the variety of investments. ## What is the difference between an IPO (Initial Public Offering) and a Secondary Offering? [...] In VC, a secondary sale refers to the active selling of shares/products in a portfolio company by investors or employees to another investor. A secondary sale in VC is an exit strategy for stakeholders and employees to allow new investors to participate in business development. ## What are the risks and challenges associated with secondary sales? Here are the risks and challenges in secondary sales. [...] Secondary sales are a functional exit point for the early shareholders of private SaaS businesses. Because of these intricacies of the secondary markets, investors, founders, and employees should strategically choose when to get involved in secondary sales to maximize their gains. ## Ready to get started? We've been where you are. Let's share our 18 years of experience and make your global dreams a reality. Talk to an Expert

• What is a Secondary Sale in Startups? - GrowthMentor

  Secondary sales differ from primary sales because in primary sales, the company sells stock to its investors and keeps the money. In secondary sales, the proceeds of the sale go towards the stockholder and the company doesn’t see a cent. Because secondary sales take place in privately owned companies, secondary sales are often the only option that investors have available to them. Secondary stockholders need to be aware of a range of implications that can come into play, including: [...] A secondary sale occurs when a stockholder sells one or more of their shares to a third-party. For it to be a true secondary sale, the sale can’t occur alongside an acquisition of the company. Instead, the shares need to be sold to another investor. [...] Secondary sales are common in the startup world, as they provide a way for existing shareholders to cash out some of their investment and for new investors to buy into the company. They can also provide additional capital for the company to use for growth and expansion. ###### Suggested mentors to help you make sense of Secondary Sale ### Rob te Braake Founder - Insight Matters Serial entrepreneur – combining love and experience in Finance, Accounting, Strategy and Coaching.

• A Guide to Understanding the Private Secondary Market - ESO Fund

  # Secondary Sales: A Guide to Understanding the Private Secondary Market Last updated: Aug 26, 2025 Secondary sales let employees and early shareholders sell their equity before an IPO or acquisition. This guide explains: [...] What a secondary sale is: Selling your private company shares to a third party, often on a secondary marketplace. When it’s allowed: Usually requires company approval and often only happens during designated windows. Pros: Early liquidity without waiting for an exit. Cons: Limited access, potential discounts on valuation, and tax consequences. Alternatives: If you can’t sell, or would rather hold your equity, ESO Fund can help you exercise options with no upfront cost or personal risk.