Secondary for employees gives staff a path to sell some vested equity while the company remains private — addressing the gap between grant date and a public listing.

How it works

Programs take several forms. A tender offer lets employees sell into a pool funded by new investors or the company. A secondary direct may allow individual sales with board approval. Some rounds include a secondary tranche where a portion of investor capital buys shares from employees and early holders rather than going to the balance sheet.

Companies set eligibility (tenure, role, vested amount), caps per person, and pricing — often at or near the last 409A or round price. Tax treatment differs by instrument: ISOs, NSOs, and RSUs each carry distinct consequences employees should understand with counsel.

Why it matters

• Founders: Regular, modest liquidity can reduce attrition without over-signaling weakness. Pair programs with clear communication about remaining upside.
• Investors: They often support curated employee liquidity but scrutinize total volume, whether founders sell disproportionately, and whether the primary round still funds growth.

Common mistake

Running a one-off secondary for executives only — rank-and-file employees notice, and culture trust erodes quickly.

Related ideas

• Secondary liquidity
• Share buyback
• 409A valuation