Founder liquidity: how to sell part of your shares without selling the company
A founder can sell part of their shares without selling the company through a secondary sale: a buyer purchases some of the founder's existing shares, the founder receives cash, and the company and its governance stay unchanged. The most common routes are a direct sale to a specialist secondary buyer, a sale alongside a funding round, or a company-organized tender offer.
Why do founders seek liquidity before an exit?
Founders of successful private tech and growth companies often hold most of their wealth in shares they cannot sell for years. Partial liquidity lets them diversify, meet personal needs and stay focused on building the company over a longer horizon instead of pushing for an early exit.
What are a founder's liquidity options before an IPO?
How it works | Main constraint | |
Direct secondary sale | The founder sells shares directly to a specialist buyer | Requires company approval under its transfer rules |
Secondary alongside a funding round | Part of a new round is used to buy founder shares | Depends on the timing and terms of the next round |
Tender offer | The company or an investor offers to buy shares from many holders at once | Organized by the company, on its own timeline |
Sale of the company or IPO | Full or market-based liquidity | The founder no longer controls the timing; usually years away |
Who buys founder shares in a private tech and growth company?
Buyers include specialist direct secondary funds, existing investors in the company exercising pre-emption rights and growth investors joining a funding round. A specialist buyer negotiates directly with the founder, works with the board and can commit to a defined timeline.
How much of their stake can a founder sell?
There is no fixed rule. Founders usually sell a minority of their holding, so that their economic interest stays aligned with the company and the other investors. The amount is often discussed with the board and lead investors and may be limited by the shareholder agreement.
Does a founder secondary send a negative signal to investors?
Usually not, if the sale is partial, transparent and agreed with the board. A moderate sale that leaves the founder with a large stake is generally read as personal financial planning rather than a lack of confidence. Concerns tend to arise when the sale is large or not disclosed.
How can a founder sell shares without disrupting the board?
Most founder secondaries are prepared with the board from the start. The founder usually informs the chair and lead investors before agreeing terms with a buyer, and the sale follows the transfer process set out in the company's articles and shareholder agreement. The size of the sale is generally kept in line with the company's plans for its next funding round, and the buyer takes no board seat or special governance rights.
About Secondary Capital Secondary Capital is a Swiss private equity fund based in Fribourg, Switzerland, founded in 2020, and a brand of PTF. It focuses exclusively on direct secondary transactions: buying existing shares from founders, management and early investors in high-growth private technology companies valued above $500 million, with tickets up to $50 million. Transactions are board-friendly, with no disruption to the company or its cap table. secondary-capital.com
This article is for general information only and does not constitute investment, legal or tax advice, or an offer to buy or sell any financial instrument.
