What is Secondary Sale?
A secondary sale is the transfer of private company shares from existing shareholders (founders, employees, early investors) directly to new investors, providing liquidity without the company raising new capital.
Secondary Market Mechanics
Private company secondary transactions require navigating complex legal restrictions. Most startup stock purchase agreements include rights of first refusal (ROFR) provisions requiring the seller to first offer shares to the company and/or existing investors before selling to third parties. Transfer restrictions may also require company consent. Tender offers on secondary platforms often involve a ‘clean-up’ mechanism where the company and investors are offered a chance to exercise ROFR before the shares go to the marketplace buyer, adding time and complexity to what might otherwise be a simple bilateral transaction.
Tender Offers in Late-Stage Startups
As private companies have stayed private longer, tender offers: structured secondary sales open to multiple sellers: have become institutionalized. Late-stage growth investors (Tiger, Coatue, etc.) frequently conduct tender offers alongside primary investments, offering founders, employees, and early investors liquidity at the round’s pre-money valuation. These transactions require careful coordination of company consent, ROFR processes, and securities-law compliance (Form D filings, blue-sky filings, accredited-investor verification).
Tax and Strategic Considerations
For sellers, secondary sales typically trigger long-term capital gains taxation (assuming the holding period is met): usually more favorable than ordinary-income treatment of W-2 compensation. Founders considering secondary sales should weigh the personal financial benefit against signaling concerns (large founder sales can spook investors), board-level optics, and any restrictive covenants from earlier financings. Sophisticated founders often coordinate with their VC investors before initiating secondary discussions.
Our analysis on this topic
In practice
Transactions Vircon Legal has announced with this structure (4 in total): Hop Health (2025), Tiplay (2023), Appsilon (2022), Abone Sepeti (2022).
Each was led by Managing Partner Erdem Mümtaz Hacıpaşaoğlu. All transactions →