Founder Secondaries:
Taking Money Off the Table Before the Exit

Short answer

Most founders sell 5–10% of their holdings in a secondary — enough to take real money off the table without signalling they're leaving. Investors usually support this during a strong, oversubscribed round. Selling much more, or during a weak raise, reads as a red flag. The proceeds are taxable, so plan the after-tax number.

Acquisitions can take ten years, and IPOs have become rare, which leaves many founders paper-rich and cash-poor for a decade while mortgages and payroll roll on regardless. Founder secondaries are the pressure valve: selling a slice of your own shares before the exit, usually around a funding round, so you can breathe without walking away. Tender offers, the company-run version, have surged as the IPO route stayed shut; industry data shows the number of startup tenders up more than 60% in 2025 on the year before.

This guide covers how much you can sell, when it makes sense, the signalling trap, and how the tax works in Germany versus the US.

How much can a founder sell in a secondary?

The working answer, repeated by investors and advisers alike, is 5–10% of your holdings. A June 2025 Crunchbase News commentary put it plainly: a founder selling 5–10% of their shares is usually seen as reasonable, especially alongside strong business milestones, and "anything much higher can start raising eyebrows."

Why so modest? Because the point of a secondary is to relieve personal financial pressure, not to cash out. Sell a tenth of your stake in a round everyone's celebrating and you signal durability — you've de-risked your own life just enough to keep swinging for the big outcome. Sell a third, and every investor at the table quietly recalculates your conviction.

Company-run tender offers show the same instinct built into the mechanics. In a typical tender structured as a buyback, the company caps how much of their vested equity each seller can offload, often around a quarter, so these stay partial-liquidity events by design, according to industry tender-offer data. Nobody gets to clear their whole position. The cap is the point.

When do founder secondaries actually happen?

Timing is not a free choice. Three things have to line up: demand, permission and a moment.

Demand shows up in hot, oversubscribed rounds. When a new investor wants to put in more than the company needs in primary capital, the overflow can buy existing shares instead, and that's the natural home for a founder secondary. No demand, no secondary.

Permission is where founders get surprised. You rarely control your own shares outright. Company and investor documents usually carry rights of first refusal and co-sale rights (the same terms covered in your term sheet), and board approval is almost always required, with investor sign-off on top. Read your shareholder agreement before you find a buyer, not after.

The moment should be a milestone: a major product launch, a strong funding round, real traction. Selling into good news frames the sale as confidence. Selling into a flat or falling market frames it as an exit, whatever you say. In a genuinely cold market, liquidity for founders is usually off the table entirely, and the harder choices, like a bridge or a down round, take its place.

The signalling problem: what the number says to investors

Here's the part founders underrate: a secondary is a message before it's a transaction, and the size of the sale is the message.

Investors read founder sales as a proxy for belief. The maths of "how much skin do they still have in the game" runs automatically in every investor's head. Keep a large majority of your stake and sell a sliver, and the signal is I've removed a distraction so I can focus on the ten-year prize. Sell heavily, and the signal is I'm taking my chips off a bet I'm no longer sure of — even if that's the opposite of what you feel.

So manage the message on purpose. Say why you're selling and keep it small and milestone-anchored. Investors are increasingly open to founder secondaries precisely because a founder with a paid-off mortgage often makes calmer, longer-term decisions. The trust holds as long as the number stays reasonable and the story is about staying, not leaving.

How founder secondaries are taxed: Germany versus the US

A secondary is a sale, which means tax. The rules diverge sharply between Germany and the US, and both have traps. Treat what follows as orientation, then get it confirmed: a tax adviser earns their fee here.

Germany

Selling shares in a GmbH (the form most German startups convert to; see UG to GmbH) is a taxable disposal. Because founders almost always hold at least 1%, the gain usually falls under § 17 EStG and the Teileinkünfteverfahren: 60% of the gain is taxable at your personal income-tax rate, and 40% is tax-free. A holder below 1% is generally taxed instead under the flat 25% Abgeltungsteuer, plus solidarity surcharge and any church tax. Which regime applies, and whether a holding structure helps, is exactly what you check before signing.

United States

Shares held longer than a year are taxed as long-term capital gains, plus the 3.8% net investment income tax for higher earners and any state tax. The big lever is qualified small business stock (QSBS) under Section 1202: if the stock qualifies, a founder can exclude a large share, potentially all, of the federal gain. The 2025 One Big Beautiful Bill Act expanded it for stock issued after 4 July 2025, phasing in the exclusion at 50% after three years, 75% after four and 100% after five, and lifting the per-issuer cap to $15 million, per The Tax Adviser. The trap: selling in a secondary before you've met the holding period can forfeit the break entirely. Timing is worth real money.

What this means for you

Run the after-tax number first, because the headline sale price is not what lands in your account. Decide the fraction (5–10% is the safe zone) and anchor the sale to a milestone your investors already believe in. Check your rights of first refusal, co-sale and board-approval terms early, since they can block or shrink the deal. If employees are selling alongside you in a tender, coordinate it with your VSOP or ESOP so the whole cap table moves cleanly. Done this way, a secondary buys you the one thing a long build costs most: the financial breathing room to stay in the game.