Startup Funding Espresso – Pricing Secondary Shares

Pricing Secondary Shares Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. In selling secondary shares a price must be set. Since the shares are in a private firm there's no market to review for a list price. Here are some factors to consider in pricing a secondary sale: Are the shares preferred stock or common stock? Preferred stock has preferences such as liquidation preference and takes precedence over common stock. Common stock is the equity type issued to founders and employees. It typically has no special rights beyond ownership. Since the stock is not publicly traded it's considered illiquid. The price reflects illiquidity and is often set at a 10% to 50% discount to the last priced round. Time to exit for the startup is another key factor. Most secondary sales come in the last three years of the startup's life. Finally, the health of the company impacts the price as the stronger the growth rate and metrics the higher the price. Preferred stock, shorter time to exit, and a high growth rate will yield a higher secondary share price. Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding. Let's go startup something today. _______________________________________________________ For more episodes from Investor Connect, please visit the site at: http://investorconnect.org Check out our other podcasts here: https://investorconnect.org/ For Investors check out: https://tencapital.group/investor-landing/ For Startups check out: https://tencapital.group/company-landing/ For eGuides check out: https://tencapital.group/education/ For upcoming Events, check out https://tencapital.group/events/ For Feedback please contact [email protected] Please follow, share, and leave a review. Music courtesy of Bensound.