I was one of the judges at a startup pitch event sometime back. One of the key questions entrepreneurs had to answer was, “Why do you want to startup?” Most answers were conventional, such as the desire to create something, work for self, change the world, passionate about starting up, and so on, until a young lady brought the house down by saying, “I want to make lots of money.” Beyond the instant laughter, she raised an important issue: Is it fair for entrepreneurs to sell a part of their shares in a secondary and create some personal wealth, while the startup struggles financially?
Every first-generation startup founder invests a lot of passion and conviction to compensate for low salaries, insanely long hours, relentless pressure and a disproportionate amount of personal risk. Several tiring years later, after perhaps some economic stress at home and watching peers in professional careers getting ahead financially, a thought starts nagging: “When should I look out for myself and consider a secondary?” In simple terms, selling a slice of personal equity before the firm becomes profitable.
Folks who have never experienced the hardships and challenges of being a first-time founder may think of such an act as questionable, but the reality is a lot more nuanced. Founders are not hermits. Building a startup is not just intellectually demanding but also financially asymmetric. For years, the founder’s net worth is trapped in illiquid equity, while others, including employees with ESOP buybacks and investors with portfolio diversification, have some degree of liquidity and protection. To expect founders to take a high moral ground and not take secondaries early is unfair.
Global examples like Travis Kalanick, Mark Zuckerberg and Brian Chesky, who sold partial stakes in secondaries in Uber, Facebook and AirBnB, respectively, before IPOing, and the Indian examples like Vijay Shekar Sharma and the Bansals executing small secondaries before the PayTM IPO and Walmart’s acquisition of Flipkart, respectively, shows that not only are secondaries common but markets also understand them.
Secondaries help entrepreneurs diversify their risks. No one should invest all their money in a single and risky asset, so why should founders? A small nest egg helps founders focus on their startup with renewed energy. A key concern about founders exiting partially early is that it could reduce their commitment. In startup jargon, this is called “skin in the game”. I believe this can cut both ways. A founder who has secured some sort of upside is more likely to stay the course longer. So, the question is not if secondaries are fair. The more important point is the timing. What is the status of the startup when the secondary happens? Is there a context where that is not normal? We will discuss these aspects in the next column.
(The writer is a serial entrepreneur and best-selling author of the book ‘Failing to Succeed’; posts on X @vaitheek)
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Published on April 13, 2026