Secondary Market
A marketplace where private company shares are bought and sold between investors.
Definition
The secondary market for private shares is where existing shareholders (employees, founders, early investors) can sell their shares to buyers before a company goes public. Platforms like Forge, EquityZen, and Hiive facilitate these transactions. Prices on the secondary market are typically discounted 10-40% from the last funding round price because the shares are illiquid and carry more risk.
Why it matters
Secondary markets give you a way to access liquidity before an IPO or acquisition. However, prices are often lower than the last round, and you will need company approval. The secondary market price can also give you a reality check on what your shares are actually worth.
Example
Your company last raised at $50/share. On the secondary market, shares are trading at $35 (a 30% discount). Selling 5,000 shares nets you $175,000 before fees and taxes, less than the $250,000 the last round implied.