Secondaries Are the New Exit: What Early Employees Need to Know

The secondary market for startup equity crossed $150B in transaction volume in 2025, roughly triple what it was in 2021. For the thousands of early employees sitting on illiquid equity in companies that may not IPO for years, this is the most significant development in personal finance since stock options became standard comp.

Why Secondaries Exploded

The math is straightforward. The median time from founding to IPO has stretched to 11+ years. Early employees who joined at Series A or B are sitting on paper wealth they can't access for a decade. Meanwhile, the secondary market infrastructure has matured dramatically — platforms like Forge, EquityZen, and Carta's secondary marketplace have made transactions that once required a Goldman Sachs relationship accessible to individual sellers.

How Secondary Sales Actually Work

1. 1.Check your company's transfer restrictions. Most startups have ROFR (Right of First Refusal) clauses that require company approval for any share transfer.
2. 2.Determine your share class and any restrictions. Common shares typically trade at a 20–40% discount to the last preferred round price.
3. 3.Choose a platform or broker. For transactions under $1M, platforms like EquityZen are standard. For larger blocks, you'll want a dedicated broker.
4. 4.Negotiate price. In 2025–2026, common shares in high-growth companies are trading at 60–80% of the last preferred round valuation.
5. 5.Execute the transfer. This typically takes 30–60 days including company approval and legal documentation.

The Tax Implications Are Significant

This is where most people get tripped up. Selling shares in a secondary transaction triggers a taxable event. If you exercised ISOs and held for more than a year, you may qualify for long-term capital gains treatment. If you have NSOs, the spread is taxed as ordinary income. The difference can be 20% vs. 37% — hundreds of thousands of dollars on a meaningful sale.

How Much to Sell

The question every Inner Ping member with startup equity asks: how much should I sell? There's no universal answer, but the framework I recommend is based on concentration risk. If more than 30% of your net worth is in a single illiquid asset, selling enough to get below that threshold is prudent diversification, not a lack of conviction.

“I sold 20% of my Coinbase shares on the secondary market in 2019. At the time, it felt like I was leaving money on the table. In retrospect, that diversification gave me the financial security to take the risk of starting my own fund.”

— Daniel Kwon

The secondary market is no longer a last resort for desperate employees. It's a strategic tool for managing personal financial risk while maintaining upside exposure. The founders and early employees who use it wisely will build more resilient financial lives.