What is Secondary Sale?
Nexa Consultancy | Startup & Finance Glossary
A secondary sale is a transaction where an existing shareholder of a private company (like a founder, early employee, or early investor) sells their shares to another investor. This is different from a primary issuance, where the company itself sells new shares and receives the capital.
Base Term for Startups: As startups stay private for longer, secondary sales have become more common. They provide a way for founders and early employees to get some personal liquidity before a full exit event like an IPO or acquisition.
For Investors: Later-stage investors often facilitate secondary sales as part of a new funding round to "clean up the cap table" or provide some liquidity to the founders, allowing them to de-risk personally and focus on long-term growth.
Base Term Example: As part of a Series C funding round, a new investor agrees to buy ₹5 Crore worth of shares directly from the company (primary) and also buys an additional ₹2 Crore worth of shares from the founders (secondary).