When, How, and Who to Ask for a Secondary Sale

"I keep hearing that Investors will let Founders take some personal money off the table in a funding round. How do I get some of that action?" [View this email in your browser]( • [Forward to a Friend]( Will Investors Let Me Take Money Off The Table? TL;DR: "I keep hearing that Investors will sometimes let Founders take some personal money off the table in a funding round. How do I get some of that action? Am I not just asking the right way?" Yes, there are Founders who take personal money off the table during funding rounds, and no, you probably won't be one of them. For the unfamiliar, there is in fact a practice whereby investors are sometimes willing to directly purchase shares from existing stockholders (like the Founders) in order to create some liquidity for them personally. It's called a "Secondary Sale" and it simply means the proceeds go to the Founder, not to the company proper. The problem is, most Founders just hear "investors will give me money personally" and assume it's a regular practice. It's not (at all) but it's also not something that's very well explained to Founders either. So, here's how this actually works. Today’s Advice Sponsored by [mabl]( When to Ask A few things have to happen for us to get a taste of that sweet, sweet secondary money. First, our deal has to be incredibly competitive, meaning lots of investors want in, and they are willing to sweeten the deal a bit (to steal it from their competition) by offering us a little something personally. Second, the startup needs to be far enough along in its growth that it's even reasonable to bring up this conversation. That means it likely has significant traction (customers, revenue) that indicates this stock will be worth a lot of money to an acquirer or potential IPO sooner than later. The thing is, there's no version where we've met these conditions and we're not aware of it. Trust me, by the time a startup is cruising at this speed, to the point where it could or should be talking about a secondary sale, it's pretty obvious. If a bunch of investors aren't stepping over each other to invest, chances are we're not there. Who to Ask But what if we are there in some capacity — who do we even ask about a Secondary? Do we look like a schmuck for even posing the question? It takes some finesse. The best way to approach a Secondary Sale topic is directly with one of our existing Board members (not the whole Board!) to take their temperature on the idea. If we are way off the mark, chances are they will tell us. Also, they are going to have a big say in whether that even comes to pass anyway, so the check-in is necessary. We need to get them on board with this approach. We don't want to go down this road solo and "hope it works out." We need at least one ally on this special ops mission so that it feels like a banded unit making the request. How to Ask So how do we actually present the ask? Well, our 'ask' needs to balance confidence in the business with a clear understanding of the need. A good presentation would be: "I'm very excited about the future of this company, but I'd like to create a small bit of liquidity to help out with some important personal milestones in the near term." That usually means buying a house, starting a family, or paying off some past debt — or all of them. Everyone understands that, so tying the ask to a specific need helps paint the picture for the ask. Just asking for some money without any reason seems a bit suspect. As funding rounds are getting bigger and more frequent, the topic of Secondary Sales is starting to come up more and more. Just understand that they are still a bit of an anomaly and many investors are not cool about them. If you feel like your startup funding round is getting very competitive and the numbers justify a little something for yourself, yes, it's worth asking. But probably not worth betting money on the outcome! [View Article Here]( Integrate low-code test automation into your development workflow Software teams, particularly those that have adopted Agile or DevOps practices, are delivering product updates to their customers faster than ever before. As a result, the [demand for more testing]( has grown exponentially. Quality teams are under extraordinary pressure to perform an adequate amount of in-sprint testing to ensure their applications are meeting customer expectations without slowing down release cycles. Mabl’s low-code test automation enables entire software teams to contribute to quality. Everyone — regardless of automation experience — can create, execute, and maintain automated tests. Start creating UI and API tests in mabl, [free for 14 days](. In Case You Missed It [How To Write A Business Plan: A Comprehensive Guide]( A step-by-step guide on writing a business plan to catch an investor's attention & serve as a guiding star for your business. [Top 4 Business Plan Examples]( Writing your first business plan? Be sure to review these four business plan examples from the Startups community that really stand out from the crowd. [What Problems Go Away With Time?]( (podcast) Running a Startup can be chaotic. But is it true that problems will go away with time? Some do, some don't. Learn how and when to align your expectations for the unexpected. Love this topic? Hate it? Let's chat on social media! Wil Schroter Founder & CEO @ Startups.com [Share]( [Share]( [Tweet]( [Tweet]( [Forward]( [Forward]( Copyright © 2022 Startups.com, All rights reserved. You are receiving this email because you joined Startups.com. Our mailing address is: Startups.com 1201 Dublin RoadColumbus, OH 43215 [Add us to your address book]( Want to change how you receive these emails? You can [update your preferences]( or [unsubscribe from this list](.