Dear SaaStr: When Is a Good Time for Founders to Sell Some of Their Stock? What are the rough guidelines for “seconday” sales if you aren’t Stripe or Databricks or OpenAI?
Secondary sales can be a great tool—when done right. I was offered secondary when Adobe Sign / EchoSign was crossing $10m ARR, and I wish I’d taken it. It would helped me push on without worrying too much about making nothing in the end.
Done right, founder secondary allows founders already hitting scale to take a little off the table, reduce stress, and focus on building something truly generational. But they can also send the wrong signals if mishandled.
Here’s how to think about it:
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Timing Matters: Secondary sales make sense when the company is at scale—typically $10M+ ARR and a valuation in the nine figures. Before that, selling shares can signal to investors that you’re not fully committed to going long. At $3M ARR or earlier, it’s usually too soon unless there’s a very specific reason.
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Keep It Small: Selling a small percentage—less than 5% of your holdings—is fine. It’s enough to take some pressure off without raising eyebrows. Anything more than that, especially early on, can look like you’re cashing out rather than doubling down.
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Be Strategic: Secondary sales should align with the company’s goals. For example, if a VC offers to buy shares as part of a growth round, it can be a win-win. They get more ownership, and you get some liquidity without diluting the company further. But if you’re pushing for secondary liquidity too aggressively, it can create tension with investors.
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Avoid Early Abuse: During the boom times of 2020-2021, secondary sales got out of hand. Founders were selling millions in shares at Series A or B, often before the company was truly at scale. Many of those founders checked out mentally, and their companies suffered. We’re still seeing the fallout from that today.
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It’s a Tool, Not a Goal: Secondary liquidity should never be the primary motivation for raising a round. The best founders see it as a way to destress and go long—not as a payday. If you’re building something real, the big rewards come later.
A bit more here:
