VC & PE Glossary
What Is Secondary for Employees?
Updated
Definition
Secondary for employees is a structured program letting staff sell vested equity to approved buyers — often alongside or within a company-facilitated liquidity event — without waiting for an IPO.
Useful for: Founders, Investors
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
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Common questions
Short answers for founders, LPs, and operators