When founders sell secondaries, it can benefit the other shareholders in the company in several ways, including:
Improved capital structure: Selling secondaries can help to improve the capital structure of the company by reducing the concentration of ownership among the founders. This can make the company more attractive to outside investors, as it may reduce the perceived risk associated with having a small number of large shareholders.
Increased liquidity: By selling secondaries, the founders are increasing the liquidity in the company. This can benefit other shareholders by providing them with the option to sell their own shares too if they choose to do so.
Reduced risk: If the founders have sold a portion of their stake in the company, it can help to reduce the risk for the other shareholders. This is because the founders may be less likely to take risks that could jeopardize the value of their remaining stake in the company.
Alignment of interests: By selling secondaries, the founders may be able to align their interests more closely with those of the other shareholders. This is because the founders will have a greater incentive to focus on the long-term success of the company, rather than solely on their own short-term personal financial gain.
Increased transparency: When founders sell secondaries, it can help to increase transparency in the company. This is because the sale of secondaries often involves an updated valuation of the company, which can provide greater insight into the company’s financial health and growth prospects.
Overall, the benefits to other shareholders of founders selling secondaries will depend on the specific circumstances of the company and the transaction. However, in general, selling secondaries can be a positive development for the other shareholders in the company.
At Nordic Eye, we are currently raising our first Liquidity Fund. A fund seeking to capitalize on and create value for investors from the often very lucrative secondary opportunities, primarily in Europe and the US. Our dedicated team in Copenhagen and London have a significant experience in venture capital and from previous roles in dedicated secondary funds.
The fund will seek to provide liquidity solutions for founders, employees and early investors, specifically in more mature growth tech companies with a more balanced risk profile that traditional venture. The Nordic Eye Liquidity Fund is designed to address the lack of liquidity in the venture capital market, allowing insiders and early investors to de-risk their personal wealth and companies to stay private longer. We are aiming for a first close during summer 2023, and the fund will play an important role in the growth and development of the European venture ecosystem.