How do founders sell shares on the secondary market to get liquidity before an IPO or acquisition?

How Founders Can Sell Shares on the Secondary Market

A founder wanted to understand how to get personal liquidity from their equity stake without waiting for an IPO or acquisition. Secondary share sales are increasingly common — but the process is less straightforward than most founders expect.

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What Are You Actually Selling?

Before approaching any buyer, understand what your shares represent in a buyer's eyes.

• Common stock (founder shares) trades at a discount to preferred stock — typically 30–50%, depending on company stage, liquidation preferences, and market conditions.
• Buyers apply this discount because preferred shareholders have structural protections (liquidation preferences, anti-dilution rights) that common shareholders do not.
• Know your cap table cold: how many shares you hold, your cost basis, and the most recent 409A valuation and round price.

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Two Main Paths to a Secondary Sale

1. Direct Secondary

You identify a buyer — an individual angel, a crossover fund, or a family office — and negotiate a private bilateral transaction.

• Pros: Faster, lower fees, more control over who ends up on your cap table.
• Cons: Requires a warm network, and price discovery is entirely on you.

2. Platform-Driven Secondary

Marketplaces aggregate buyers and create a more transparent pricing environment for private company shares.

• Pros: Broader buyer pool, better price benchmarking, more process support.
• Cons: Platform fees, less control, and the company may be notified or need to consent.

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The Price Discovery Problem Is Still Real

Historically, secondary markets for private equity were opaque — wide bid/ask spreads, brokers capturing significant fees, and no public record of what comparable shares actually cleared at. That is changing as platforms mature, but pricing remains founder-unfriendly if you walk in without benchmarks.

Before listing or approaching buyers, know:

• Your company's most recent 409A valuation
• The price-per-share from the last financing round
• The discount range buyers in your sector and stage are currently accepting
• Whether recent secondary transactions have occurred in your company (sometimes disclosed in financing docs)

"The friction isn't legal, it's informational. Most founders don't sell secondaries because they don't know what their shares are worth or who's actually buying."

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ROFR: Your Number-One Trip Wire

Right of First Refusal (ROFR) clauses in shareholder agreements give existing investors — and sometimes the company itself — the right to match any outside offer before you can complete a transfer.

What to check before approaching any buyer:

• Does your shareholder agreement include a ROFR on common stock transfers?
• Does the company or the lead investor have the right to block transfers to buyers they disapprove of?
• Is board approval required for any share transfer?
• Are there lock-up provisions that restrict transfers within a certain window post-financing?

Failing to check these first can result in a transaction being voided — or damaging your relationship with your investors.

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The Key Variable That Changes Everything

The right secondary strategy depends heavily on your situation:

• Still-growing company, no exit signal: You are taking chips off the table in a healthy but illiquid asset. Buyers will price in the uncertainty. Expect steeper discounts, and expect the company to have opinions about who your buyer is.
• Stalled or uncertain liquidity event: You may be holding equity where the exit timeline is genuinely unclear. In this case, the buyer pool shifts — distressed-secondary buyers and specialist funds become more relevant, and the discount you accept may need to be larger to clear the market.

These two scenarios lead to very different conversations with very different buyers.

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Practical Checklist Before You Sell Secondaries

1. Pull your shareholder agreement and identify all transfer restrictions and ROFR clauses 2. Get your most recent 409A and last-round price per share 3. Calculate your common-stock discount range relative to preferred 4. Decide: direct buyer outreach or platform-driven process? 5. Identify whether board or company consent is required 6. Consult a securities attorney — secondary transfers have legal compliance requirements that vary by jurisdiction

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Bottom Line

Secondary sales are a legitimate and increasingly accessible path to founder liquidity. The mechanics are not the hard part — the hard part is pricing your shares accurately, navigating transfer restrictions, and finding buyers who are actively deploying into your company's stage and sector. Do the legal homework before you do the outreach.