Preparing for a Secondary Sale Transaction

A secondary sale is important to the founders and employees of a company.

It gives them the opportunity to sell their shares to gain liquidity in advance of the company’s exit.

Here are some key issues to consider:

Founders normally receive common shares when launching the company.

There are advantages for founders who have preferred shares.

Founders should consider starting with preferred shares instead of common ones.

Generate interest in the secondary sale to create demand.

A priced fundraise often raises the interest of investors and provides a base price for the shares.

Contact funds and investors interested in secondary shares during the fundraise.

There are investors who regularly buy secondary shares and should be put on notice about your pending offer.

Finally, position the business so it is attractive to investors.

Ensure the company’s metrics and market position are aligned with investor’s expectations.

 

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.