Full Definition
The secondary market for private company shares is where existing shareholders — founders, employees, and early investors — can sell their equity to other investors before the company goes public or is acquired. This provides liquidity to people who would otherwise need to wait for a formal exit event.
Secondary Market Platforms
- Forge Global: Platform for trading pre-IPO shares
- EquityZen: Access to pre-IPO investments
- SharesPost (acquired by Forge): Secondary marketplace
- Carta: Facilitates secondary transactions
- Direct negotiations: Company-facilitated tender offers
Considerations
Secondary sales often require company approval (ROFR — right of first refusal), may be subject to transfer restrictions, and typically occur at a discount to the latest primary round price.
Real-World Example
An early employee sells $500K of vested shares through a secondary marketplace at a 15% discount to the latest Series D price, providing personal liquidity after 7 years at the company.
Related Terms
The process of offering shares of a private company to the public for the first time on a stock exchange.
A planned approach for founders and investors to realize returns on their investment in a company.
A provision allowing minority shareholders to sell their shares alongside majority shareholders in a sale.
A class of shares with special rights and preferences over common stock, typically held by investors.
Ownership interest in a company, represented by shares of stock.
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