What should founders know about secondary sales and insider sales?
Short Answer
Secondary sales allow founders to sell shares to new investors while company raises primary capital. Common post-Series B: founders can take £100K-£1M in secondary to manage personal cash needs.
Full Explanation
Secondary sales are founder share sales to new investors (distinguished from primary fundraising, where the company raises capital). Example: company raising Series B (£10M primary). Existing founder might sell £500K of their shares to the incoming investor (secondary component). This gives the founder liquidity without the company raising more than needed. Secondary sales are standard post-Series B and common in growth-stage rounds. Limits: typically 10-25% of primary round size. Investors expect founders to maintain meaningful ownership (>20%) to ensure alignment. Founder honesty: "In our Series B, we raised £10M primary and I sold £300K secondary to take some chips off the table. I maintain 45% fully diluted ownership, well above investor expectations. Personal cash from secondary allows me to pay down personal tax liability and avoid a home loan." This is normal and expected. Over-reliance on secondary (selling 50%+ of ownership before exiting) concerns investors because it signals founder disengagement. Tax considerations: secondary sales trigger capital gains tax. Founders should budget with accountants for these taxes. Opagio's questionnaire helps founders model personal financial scenarios and understand secondary sales impact on cap table and personal liquidity.
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Further Reading
LTV:CAC for Founders: The Ratio That Predicts Fundraising Success
LTV:CAC is the ratio investors use to determine whether your business model works. This guide explains how to calculate it correctly, the benchmarks by stage and business model, and why improving LTV:CAC signals intangible asset compounding.
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