Secondary Sales: Liquidity for Founders and Early Investors Before an Exit
A secondary sale lets founders, employees and early investors sell existing shares before an IPO or acquisition. Done well, it lowers personal risk and tidies the cap table without changing who runs the company. Done badly, it signals doubt, sets a low price reference and triggers transfer restrictions nobody read.
Secondaries have moved from exception to routine because exits take longer. Jefferies' Global Secondary Market Review (July 2026) counted a record $118 billion of secondary volume in the first half of 2026, after a full-year record of $240 billion in 2025. Most of that volume is fund investors trading fund stakes or moving companies between funds, not founders selling shares. The driver is the same, though: Jefferies notes that distribution yields on LP portfolios stayed near 10% a year, against a historical average of 25% since 2001.
This piece compares the four main types of secondary, how they are priced, what they signal, which restrictions apply and when each one makes sense.
Key takeaways
- A secondary changes who owns the shares, not how much capital the company has, so it must be justified on its own terms.
- Secondary shares usually price below the last preferred round, because common stock lacks the preferred rights.
- The same sale can read as prudence or doubt, which is why the story around the sale matters as much as its size.
- Rights of first refusal, co-sale rights and board consents decide whether a sale can happen at all.
- A secondary makes most sense when the company is performing and a credible buyer wants more ownership.
Four types of secondary and who they serve
Founder secondary
A founder sells part of their stake, usually alongside a priced round, to a new or existing investor. The logic is simple. After years on a modest salary, most of the founder's net worth sits in one illiquid asset. Taking some money off the table can make a founder a more patient decision maker, not a less committed one.
Early investor sale
Angels, seed funds or accelerators sell to a later-stage investor who wants more ownership than the primary round allows. For early holders, it returns capital to their own investors. For the company, it can simplify a crowded cap table.
Tender offer
The company, or a buyer it approves, offers to buy shares from a broad group of holders at one price within one window. Tenders are the standard tool for employee liquidity. Carta data shows that 16,538 employees sold equity through tender offers in 2025, the highest annual total it has recorded.
Continuation vehicle
A fund manager moves one or more portfolio companies from an older fund into a new vehicle, and the old fund's investors choose between cash and rolling over. Jefferies counted $62 billion of GP-led volume in the first half of 2026, 53% of the market, with single-asset vehicles making up 68% of continuation vehicles. If your lead investor's fund is near the end of its life, expect this conversation.
| Type | Who sells | Who usually buys | Main watch-out |
|---|---|---|---|
| Founder secondary | Founder | New round lead | Size relative to remaining stake |
| Early investor sale | Angels, seed funds | Later-stage fund | Price reference for common |
| Tender offer | Employees, early holders | Company or approved investor | Fair process, tax, disclosure |
| Continuation vehicle | Existing fund LPs | Secondary funds | New investor's time horizon |
How secondaries are priced
Expect a discount to the last round in most cases, for three reasons:
- Share class: founders and employees usually hold common stock, which lacks the liquidation preference and protective rights of preferred stock.
- Information: the buyer knows less than insiders and prices that gap.
- Liquidity: small blocks with transfer restrictions are harder to resell.
Fund-level data shows the same pattern across asset classes. In the first half of 2026, Jefferies put average pricing for venture LP portfolios at 79% of net asset value, against 91% for buyout portfolios. That measures fund stakes, not single companies, but it shows how buyers price longer and less certain paths to exit.
The discount narrows, and can disappear, when demand outruns supply: a company in a competitive round, a buyer who needs ownership to make the investment worthwhile, or a tender priced at the preferred price. The price also has consequences beyond the deal. In the United States, a secondary price can feed into the 409A valuation used to price employee options, and similar valuation questions arise in other jurisdictions. Confirm the tax and valuation effects with counsel before agreeing to a price.
Signaling: what investors read into a sale
The same transaction can mean opposite things. A founder selling a modest share of their holdings to a new lead, with the board's support, reads as normal housekeeping. A founder selling heavily outside a round, while the company misses plan, reads as a vote of no confidence.
Three questions shape how a sale is read:
- Size: does the founder still hold enough to be strongly motivated by the outcome?
- Timing: is the sale tied to a round led by a credible investor, or happening quietly between rounds?
- Narrative: has the reason been explained to the board and existing investors before they hear it elsewhere?
Early investor sales carry their own signal. A seed fund selling in year seven is often managing its own fund life, not passing judgment on the company. Say so explicitly, because the alternative reading is worse.
Transfer restrictions: ROFR, co-sale and consents
Most shareholder agreements restrict transfers. Read them before talking to buyers, because they decide whether a sale can happen and on what timeline.
- Right of first refusal (ROFR): the company or existing investors can buy the shares on the same terms as the outside buyer.
- Co-sale or tag-along: other holders can sell alongside the seller on the same terms, which can shrink the seller's allocation.
- Board or investor consent: some transfers need approval, and some buyers, such as competitors, can be excluded outright.
- Lock-ups and vesting: unvested or locked shares usually cannot be sold.
- Holding company rules: in cross-border structures, the transfer may happen at holding company level under a different governing law.
What it looks like: a founder agrees a price with a buyer, then discovers a ROFR notice period and a co-sale right.
Why it hurts: the buyer walks or the deal shrinks, and the board learns about it late.
The fix: brief the board first, run the ROFR process formally and document the transfer cleanly. That is far easier when the cap table is already clean.
What it looks like: an undocumented side deal, where shares were promised to a friend or an employee by message.
Why it hurts: it surfaces in diligence and delays the next round.
The fix: every transfer goes through the company, with a signed agreement and an updated share register.
When a secondary makes sense
| Situation | Makes sense? | Why |
|---|---|---|
| Founder after Series B, most wealth in one company | Yes, modestly | Reduces personal risk, keeps alignment |
| New lead wants more ownership than the round offers | Yes | Combine primary and secondary |
| Long-tenured employees, no exit in sight | Yes, via tender | Retention and fairness |
| Seed fund near the end of its fund life | Yes | Returns capital, simplifies cap table |
| Company missing plan, founder wants out | Rarely | Strong negative signal |
| No credible buyer, price set by a friend | No | Creates a bad price reference |
In markets with thin IPO activity, secondaries are part of the exit plan, not a deviation from it. That is especially true in emerging markets, where the buyer universe is small, as we cover in the emerging-markets exit problem. A secondary also belongs in the wider sequence of planning a strategic exit, because the price set today becomes a reference point for the buyers you meet later.
Founders who take liquidity should plan what happens to it. A multi-family office is one way to handle diversification, structuring and succession around a first liquidity event. GETVISION advises business owners at Round B and beyond on secondaries as part of wider exit and liquidity planning, and one rule holds across the deals we see: the best time to sell a little is when the company does not need you to.
Frequently Asked Questions
A right of first refusal lets the company or existing investors buy the shares on the same terms offered by an outside buyer. The seller can only sell to the outside buyer if the right is waived or not exercised within the notice period.
It depends on size, timing and context. A modest sale to a new lead with board support is normal, while a large sale outside a round while the company is underperforming is read as doubt.
A tender offer is a structured secondary in which many holders can sell at one price within one window, usually organized by the company. A one-off secondary is a negotiated sale between a single seller and a single buyer.
A continuation vehicle is a new fund set up by an investment manager to buy one or more companies from an older fund it manages. Investors in the old fund can take cash or roll their stake into the new vehicle.
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Corporate Governance for Scale-Ups: Building a Board Before You Need OneGETVISION's strategic advisory works with business owners at Round B and beyond on expansion, strategic exits and mergers, with access to a global network of investors and buyers. Talk to our team.