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I hope you’re having a great week! In the last issue we walked through the startup acquisition process. Today we look at the liquidity path that doesn’t require selling the company at all.

Let’s talk about ⬇️

Carta tracked $61.1B in VC secondary transaction value from July 2024 through June 2025.

That’s more than the combined value of every VC-backed IPO over the same period.

Companies stay private for ten years or longer now. Employees and early holders still need a path to cash at some point. Secondaries became that path.

Which means a lot of finance leads at $5-50M ARR companies will see a liquidity request land on their desk in the next year or two. Sometimes from a founder. Sometimes from an investor asking whether the founder wants one as part of a round.

The mechanics are well understood. What decides whether it goes well is three things: how big, when, and how it’s framed to the board.

I’m exploring what AI should actually do for finance teams. Not demos. The real work that eats your week.

Tell me where your time goes and what you’d hand off tomorrow. Everyone who answers gets the full results.

An existing shareholder sells their shares to a buyer. Founder, employee, or early investor.

The company gets no cash. No new shares are created. Ownership just changes hands.

A Series B with $30M primary and $5M secondary grows your cash balance by $30M. The cap table moves on both.

The common forms:

Founder secondary. A founder sells a slice of their holdings inside a priced round, usually to the new lead or an existing investor.

Tender offer. A company-run window where eligible holders sell a portion of vested shares at a set price. Every tender is a secondary. Plenty of secondaries aren’t tenders, and the legal distinction turns on a multi-factor test.

Direct secondary. A shareholder finds a buyer on their own, subject to the company’s right of first refusal and any co-sale rights.

Fund secondary. An early investor sells their position or their LP interest. Not your decision, but it can put a new name on your cap table.

Almost every venture-backed company restricts transfers. So none of these is a private handshake. Board awareness, notice periods, and counsel are part of every one.

The dollar amount matters less than the percentage of the seller’s position being sold.

Step 1. Seller’s fully diluted stake before the deal.

Step 2. Shares sold ÷ shares owned. This is the first number a lead investor asks for.

Step 3. Price against the last primary round.

That third step catches people. Secondary shares, common stock especially, usually price 20-40% below the last preferred round. Preferred carries liquidation preferences and protective rights. Common doesn’t. Buyers won’t pay preferred prices for common shares.

None of these are rules. They’re patterns from term sheets and advisory practice.

The number that actually matters is whatever your lead investor caps it at. That cap is the signal.

Small reads as retention insurance. A founder selling 5-10% next to a strong primary round can stop thinking about the mortgage and start making longer-horizon decisions. Most boards like that.

Large or early reads as fading belief. Selling 20% or more before retention or margin is proven tells the room you’d rather de-risk than build. Growth investors don’t want to co-invest next to someone heading for the exit.

Timing changes everything. Tied to a strong round, healthy NRR, and the lead’s blessing, it looks like normal portfolio management. Requested because of personal cash need and disconnected from company performance, it looks like distress, even when the business is fine.

Who participates matters too. Recent tenders have been structured with broad employee participation, and they land much better with investors than the founder-heavy sales common in 2020-2021.

Sizes have cooled as well. Median tender size at Series C and later fell roughly 31% between 2021 and the first half of 2025. At Series B and earlier, about 59%.

If someone’s benchmarking against 2021 comparables, they’re benchmarking against a market that’s gone.

The slide: “Liquidity program.” One line. Founders to sell up to 20% of vested holdings alongside the Series B.

What wasn’t there: employees.

No allocation for anyone else. No rationale. No cap table before and after. No pricing range.

The business was doing fine. But the slide read as leadership quietly cashing out, and that’s how the lead investor read it too. The conversation that followed was about conviction, which is a much harder conversation than the one about liquidity.

The fix: structure it as a company-wide window where you can, or cap founder participation below the employee cap. Then bring the cap table model, the price range, and the reason in one package.

Cap table before and after. Fully diluted, both states. Total shares outstanding should be identical. Showing that explicitly heads off the dilution question.

Price as a range. Built off the preference stack. Not the headline preferred price.

The reason, stated specifically. The company’s cash doesn’t move, but the board will still ask what problem this solves. Retention risk, founder comp history, or a named flight risk. “General liquidity” isn’t an answer.

Your cap, decided in advance. Walk in with the percentage already set internally. A number defended in the room sounds improvised. A number you arrived with sounds governed.

Eligibility, documented. For a tender: who’s eligible, at what price, with what cap. Ambiguity here creates resentment fast.

ROFR and co-sale with counsel first. Before any buyer conversation. Skipping it can void the transfer or breach your investor agreements.

Before saying yes to any secondary, tender, or liquidity request:

If any answer lacks a number or a name, it isn’t ready for the board.

A well-sized secondary takes personal financial pressure off the people building the company. Badly sized or badly timed, it becomes the thing your next lead investor brings up in every diligence call.

The difference comes down to preparation. Size it against the stage range. Price it as a range. Frame it as a decision with a reason attached.

For finance leads, the practical job is simple. When a liquidity request shows up, it gets the same treatment as a headcount plan or a pricing change: a model, stated assumptions, and a recommendation.

Reply “SECONDARY” and I’ll send the secondary sale prep pack. Before/after cap table template, the discount range builder off a liquidation preference stack, and the eight-question board check as a one-pager.

First week where it actually felt like autumn in Valencia. Jackets came out. Mostly for show.

Buying finance software usually means weeks of demos and sales calls. FATE puts 100+ vendors on one floor for two days, so you can compare them side by side.

November 18–19 at the Javits Center, New York.

I’ll be there too. Reply if you’re coming and we’ll grab a coffee.

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