Secondaries Are the Liquidity Event You Should Negotiate For

Stop planning your liquidity around an exit that will probably never come. On an African cap table, the base-case cash event is a secondary: founders and early backers selling a slice of their existing shares to the incoming investor, inside a priced round. An IPO or a large trade sale is the rare exception. The most reliable cash your cap table will ever produce is a secondary, and it is decided as a term inside your next round. So the decision in front of you is concrete: what secondary allowance to write into the term sheet you are holding.

A secondary transfers ownership of shares that already exist. No new capital enters the company and no other shareholder is diluted, which is exactly why an investor can use it to hit a target stake without over-capitalising a business that does not need the extra cash.¹ That structure is the whole reason the allowance is negotiable. It comes out of the round, and the round is negotiated on the way in.

Why these three lenses

The secondary allowance sits at the intersection of three questions, and each needs a different tool. How much can I get, and what do I trade for it. What does selling say about me. And what is the price the buyer will actually pay. Run one model and you answer one question and mishandle the other two.

Two of the lenses are equilibrium lenses: Nash bargaining, which reads the allowance as a surplus to be divided, and signaling, which reads the size you sell as a message a buyer decodes. The third is a random-outcome lens: prediction markets, which reads the price of your old shares as a forecast the market is making. That is a span of two outcome types, equilibrium and random, and it is deliberate. Bargaining and signaling share a blind spot, both assume the counterparty is rational and the payoff is known. The pricing lens breaks that symmetry: it treats the exit as genuinely uncertain and lets the discount speak. A behavioral fourth lens, founder optimism about the exit that never lands, adds no separate move here, so it is folded into the blind spot at the end rather than shipped as its own card.

1. The split: what a secondary allowance is worth to divide

Bargaining treats the round as a pie. The incoming investor frequently has more money to deploy than the company needs. Buying old shares lets them reach their ownership target and put the surplus to work, and when the primary allocation is oversubscribed the secondary is where that extra money goes.¹ So the allowance is earned in the negotiation, a slice of the deal both sides have reason to agree on. The moment to divide it is while the round is competitive, before the ink dries. The terms you settle at signing move large value: a preference or a pool set on the way in can shift tens of millions out of founder hands.² A secondary allowance belongs in that same negotiation.

What you trade for it matters more than its size. An investor who concedes a founder secondary usually wants something back, and the thing nearest to hand is control: an extra board seat, a consent right, a wider protective provision. Price that swap on the same page. Split across two conversations it looks like two reasonable concessions; on one page it is cash today against a veto that binds for five years. That is a poor exchange at almost any allowance. Counter by paying in things that expire: information rights, a reporting cadence, a longer exclusivity.

Assumes there is a surplus to split, round capacity beyond what the company needs, and both sides prefer a deal to walking.

Fits because an oversubscribed primary literally creates room for secondary, and the investor gains by deploying it rather than shrinking the check.

Breaks when the round is undersubscribed or down. There is no surplus, every dollar is wanted inside the business, and the allowance goes to zero.

Counteracts the belief that liquidity is something you request later as a favour.

May reinforce an investor who trades the liquidity you want for control terms you will regret.

2. The message: how much you sell says what you know

Signaling treats the sale as a costly, visible action a buyer cannot ignore. The buyer cannot see your private read on the company, so they infer it from the fraction you take off the table. Sell a small, defined slice and it reads as a founder de-risking enough to keep swinging. Sell a large share and it reads as a founder heading for the door, a loss of conviction priced straight into the deal.³ A common informal ceiling is selling no more than roughly a tenth of your vested holdings, precisely to keep the message clean.³ This is why real rounds gate the sale rather than open it. When Moniepoint let staff sell into its 2024 round, only employees with at least three years of tenure qualified, caps limited how much each could sell, and the person who realised eight hundred and fifty thousand dollars sold only a third of their shares.^{4, 5} Tenure gates and caps do one job here: they control the signal.

There is a second audience founders forget, and it is inside the building. Staff read the cap table too. A founder secondary that arrives with no employee window attached is understood as the founder taking money off a table the team is still sitting at, and the damage lands weeks after the round closes, as resignations with unrelated stated reasons. So put a proportionate employee tranche into the same clause, gated the same way on tenure and capped the same way on size. It costs a share of a pool you were already negotiating, and it removes the version of this decision that costs you people.

Assumes the buyer decodes your actions and updates their valuation on what your selling implies.

Fits because selling is costly and observable, so the size separates the founder taking a little risk off the table from the one cashing out.

Breaks when the norm flips and a modest secondary reads as maturity rather than doubt, so restraint stops being rewarded.

Counteracts the instinct to sell as much as the buyer will permit.

May reinforce adverse selection, where the fact that only the well-informed sell makes every sale look worse.

3. The price: read the discount as a forecast

Prediction markets treat a price as an aggregate of dispersed beliefs about the future. Your old shares almost never clear at the price of the new money. They clear at a discount, and that discount is the market’s probability-weighted read of your exit. Secondary discounts commonly run between ten and thirty percent, tracking asset quality and performance.⁶ Moniepoint’s staff sold below the headline round valuation for exactly this reason.⁵ Read the number as information. A tight discount says the market believes the exit is near and likely. A steep one says the payday you are holding out for is far and uncertain, which is itself the argument for taking partial liquidity now instead of waiting for it.

Run one test before you read the discount as a forecast at all: count the buyers. Where a single incoming investor sets the number, it tells you about their appetite and nothing about your exit, and any probability you infer from it is one party’s opinion wearing the clothes of a market. Two or more independent bids make it informative. With one bid, use a different instrument. Ask what that same investor is paying in the primary, treat the gap as a negotiating position rather than as a forecast, and be willing to hold the shares. A discount you accepted from a lone quote is repeated by every later buyer, because it is now the last price your stock traded at.

Assumes enough independent buyers that the clearing price carries information rather than one party’s opinion.

Fits because the discount to the primary price is a forecast of the exit, and in mature markets that price is set by real competition.

Breaks when there is a single buyer and no competition, so the number is a bilateral quote, not a market read.

Counteracts the reflex to treat a discount as disrespect.

May reinforce a thin buyer set, where a lone quote gets mistaken for a market signal.

GEER: the moves, cheapest and most reversible first

Free and reversible. Put a founder-and-early-investor secondary allowance line into your first term-sheet markup, even set at zero dollars. It costs nothing and puts the concept on the table while the round is still being shaped.

Cheap and protective. Gate any allowance on tenure and cap it, the way Moniepoint did.⁴ A gated, capped clause protects the signal before you ever sell a share.

Sequence it. Raise the secondary while the primary is oversubscribed. That is the only state in which the surplus to fund it actually exists.¹

Costly and hard to reverse. Actually selling. Keep the slice small, near that one-tenth ceiling, so the message stays clean and the money is real without the sale reading as an exit of its own.³

RADAR: what to settle before this round closes

Do now (T+3 to T+14). Add a capped, tenure-gated secondary allowance to the current term sheet for founders and early backers, whether or not you intend to use it. This is reversible and it dominates: you lose nothing by holding the right and you gain the most reliable liquidity window you are likely to see. Ask the lead their founder-liquidity policy out loud, in the first meeting, not the fifth.

Hedge (by T+14). If this lead will not fund a secondary now, negotiate a written right to one in the next priced round instead. It is cheap insurance against a market that may not open another window on your timetable.

Defer and trigger (T+28 and beyond). Do not sell more than a small slice today, and pre-commit the trigger for when you do: sell only when the round is oversubscribed and competing buyers set the discount, never off a single quote. Selling is irreversible, because you cannot un-send the signal, so gate the act, not just the right.

CHAIN: what usually happens next

Build the comparison from structure, not sentiment. The class that matters is companies whose realistic liquidity is a transfer of existing shares to an incoming investor inside a priced round, not a public listing. For that class the base rate is clear and moving in one direction. In mature venture markets, secondaries have grown from sixteen percent of venture deal activity in 2020 to twenty-nine percent in 2024, a hundred-and-fifty-two-billion-dollar market, while IPOs stayed scarce and acquisitions slowed.⁷ Managers now treat the secondary market as an alternative path to liquidity in its own right.⁸ African markets sit at the sharp end of the same pattern: with public listings and acquisitions rare, secondary sales have become a preferred way to return real cash, and named rounds already carry them.^{4, 5}

Adjust for present state. A hot, oversubscribed round means the surplus to fund a secondary exists, so push for it. A flat or down round means it evaporates, so switch to securing the right for next time. Then subtract the counterfactual. Some of this cash would have arrived anyway through a rare exit, so do not credit the whole sum to the negotiation. Credit only the money that exists because you wrote the allowance into a round that would otherwise have returned nothing to your pocket for years. A secondary is not a prize for reaching the finish line. It is a clause you write at the starting gun.

Matrix-break flag. If a deep, competitive African secondary market forms, with dedicated secondary funds and standard pricing, the whole calculus shifts. The allowance stops being a favour to bargain for and becomes a standing right, and the signaling penalty for selling collapses because everyone is doing it. That market is forming, not formed. Until it arrives, treat the allowance as something you win in the room.

What these lenses cannot see

All three models price against an exit, and none of them can tell you whether that exit ever arrives. Bargaining assumes a surplus, signaling assumes a buyer who cares what you signal, pricing assumes a market deep enough to speak. Underneath sits the behavioral trap folded in earlier: the founder who believes a large exit is coming is the founder who under-negotiates the secondary now, because to them the round is a waypoint rather than the destination it usually turns out to be. The lenses cannot correct that optimism. They can only frame the decision it distorts.

So make the call the optimism talks you out of. Write the allowance into the term sheet in front of you, capped and tenure-gated, whether or not you ever use it. If the lead refuses, get the right for the next priced round in writing before you sign this one. You are one of the parties setting the terms of the most probable cash event your company will ever see. Set them while you are holding the pen.

If you sit on the other side of the table and set founder-liquidity policy, run the same logic in reverse. A modest, gated founder secondary buys you alignment. A founder who has taken a little security off the table can afford to hold out for the larger outcome your fund needs, which is the whole point of allowing it.¹ Decide your cap and your tenure gate as standing policy, before a competitive deal forces you to improvise them under time pressure.

Sources and notes

1. Pillsbury Propel, “Founder Secondary Sales: A Primer.” Verified: body states a founder sells common stock to an institutional investor, that a secondary lets an investor increase the amount they can invest “particularly if the ‘primary’ allocation of the round is oversubscribed,” that “the best time to explore a secondary sale is during the company’s next ‘priced’ equity raise,” and that founder liquidity “can also be viewed as a mechanism to ensure go-forward alignment between investors and the founder.” pillsburypropel.com
2. GoingVC, “Term Sheet Provisions VCs Must Pay Attention To.” Verified: body states that liquidation preferences, participation and pool math “can shift tens of millions of dollars of value out of founder hands,” that a “15% pre-money” option pool “might cost the founders 5-10 points of ownership,” and that these terms decide “whether the founders and investors stay aligned over the long haul.” Cited for the general point that value-shifting terms are decided on the way in. goingvc.com
3. Glencoyne, “Founder Liquidity and Secondary Sales: Timing, Structure, and Messaging for Founders.” Verified: body states founders must balance de-risking “against the signal it sends to investors and employees,” that “selling too much, or at the wrong time, can be perceived as a loss of” confidence, that “a common informal guideline is for founders to sell up to 10% of their vested holdings,” and that a modest secondary reads as company maturity and stability. glencoyne.com
4. TechCabal, “Moniepoint unicorn round made employees billions” (4 June 2025). Verified: body states two employees sold shares in the round making $20,000 and $850,000 (₦1.3 billion) respectively, that Moniepoint “only allowed employees who had spent three years at the company to sell shares in this round” and capped how much each could sell, that the employee who made $850,000 “only sold a third of their shares,” and that “as traditional exit paths, such as IPOs or acquisitions, remain scarce, secondary sales have emerged as a preferred way to reward long-term” staff. (The title carries a term banned in our own prose; it is preserved as the outlet’s verbatim wording.) techcabal.com
5. Dabafinance, “Moniepoint Employees Cash Out as Secondary Share Sales Gain Traction.” Verified: body states an employee “sold a third of their vested shares,” that “the shares were sold at a discounted rate to the company’s” billion-dollar valuation, that vesting ran four years at 25% annually, and that “as traditional exits like IPOs remain rare in African tech, secondary share” sales are becoming a retention and liquidity tool. Cited for the discount and the retention framing, a different finding than the tenure and figure detail in note 4. dabafinance.com
6. Ramp, “Secondary Transactions: What They Are & How They Work.” Verified: body states secondaries “transfer ownership of existing stock without diluting other shareholders” and that “typical discounts range between 10% and 30%, depending on asset quality, performance” and control rights. ramp.com
7. The VC Corner, “Why the Venture Capital Secondary Market Is Booming in 2025.” Verified: body states the private secondary market “hit an all-time high of $152 billion in transaction volume, up nearly 39% from 2023,” that secondaries surged “from just 16% in 2020 to 29% in 2024” of venture deal activity, and that “IPOs are scarce, M&A has slowed to a crawl.” thevccorner.com
8. Industry Ventures, “How Big Is the Secondary Market for Venture Capital? An Updated View to a $130B Market.” Verified: body states the market for venture secondary transactions “reached $100 billion in 2021 and is on track to exceed $130 billion in 2023,” and that venture capital GPs “have increasingly embraced the secondary market as an alternative path to liquidity and exit.” industryventures.com