Why secondaries matter to a first-time founder
Secondaries can give founders, employees or early investors liquidity before an exit and can reorganise the shareholder base. They do not normally put new cash into the company, and a large founder sale may concern incoming investors. Transfer restrictions, tax, information rights and company approvals can materially shape the deal.
Examples of secondaries
During a ¥2 billion funding round, a new investor buys ¥1.7 billion of newly issued shares and ¥300 million of shares from an early employee. The company receives the ¥1.7 billion primary proceeds; the employee receives the ¥300 million secondary proceeds, subject to tax and any exercise or transaction costs.
Common misunderstanding
Secondaries are not a new funding round by themselves, because the company usually issues no new shares and receives no sale proceeds. They also differ from public-market trading: private-company transfers may require board consent, rights of first refusal, waivers and detailed buyer eligibility checks before ownership can change.
When to use it
Consider a secondary when there is a genuine liquidity need, a suitable buyer and enough demand to avoid undermining the primary financing. Review the articles, shareholders’ agreement, securities rules and tax consequences before agreeing terms. Set a clear policy so similar holders understand who may sell, how much and when.