Secondary Transaction

Definition

The sale of existing shares between investors, employees, or founders, rather than new share issuance. The legal way for early employees to cash out without an exit event.

Example Usage

We did a secondary round where early employees could sell a portion of their vested shares to a late-stage investor without a full company exit.

Origin

Financial markets terminology for trading existing securities; adapted to private equity and startup contexts.

Fun Fact

Secondary transactions exist because early employees need liquidity before potential 10-year exits, which is surprisingly humane for venture capital.

Source: Venture capital and private equity terminology

Related Terms

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When a startup prioritizes acquiring recognizable brand-name customers purely for credibility, even if those deals are unprofitable or unsustainable. It's the corporate equivalent of name-dropping at parties.

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Risky business undertakings or investments that could either make you rich or teach you expensive lessons about market dynamics. In startup speak, it's what venture capitalists fund, hoping that one unicorn will make up for the nine failures. Think of ventures as business experiments where the hypothesis is "this will make money" and the results are usually mixed.

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warm introduction

A referral to an investor through a trusted mutual connection, as opposed to cold outreach. The difference between getting a response and having your email automatically archived.

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Rule of 40

A metric suggesting that growth rate + profit margin should equal 40% for a healthy software company—8% growth with 32% margin, or 35% growth with 5% margin, both equal 40.

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inside round

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