Secondary
The sale of existing shares by a current shareholder, rather than the issue of new shares by the company.
Why it matters
The money goes to the seller, not into the business, so a secondary does not extend your runway. For founders it can be a way to take some risk off the table after years of illiquidity, but investors read a large founder secondary as a signal about commitment.
A worked example
In a $20M Series B, $18M is primary and goes to the company, while $2M is secondary and buys shares from founders and early employees.
What is typical
Founder secondaries usually become acceptable from Series B onward and are typically limited to a modest share of the founder's holding. Expect the amount and the optics to be negotiated.
Related terms
Tag-along
A provision letting minority shareholders join a sale on the same terms as a selling majority holder.
Read more →Preferred stock
The share class investors buy, carrying rights that common stock does not have.
Read more →Run your raise on this
VCTerminal models these terms on your real cap table, so you can see what a term sheet pays you before you sign it.
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