At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m – delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. If you’re thinking of launching or managing a secondary liquidity program, contact us today to start the conversation.
As venture-backed companies mature, secondary liquidity becomes a natural step in their evolution. Employees and early investors often look for opportunities to realize some of their paper gains before an IPO or exit. Marketplaces like Forge or CartaX have made this process more accessible, but accessibility does not equal control.
When companies allow employees to sell shares directly on open secondary marketplaces, they expose themselves to potential chaos in their cap table, valuation misalignment, and information leakage. What begins as a well-intentioned liquidity initiative can quickly create governance, compliance, and strategic issues.
Using an experienced advisor to structure and execute a secondary program can provide a controlled, compliant, and value-enhancing solution that aligns the company’s long-term strategy with shareholder liquidity.
While marketplaces offer convenience, they also introduce structural risk for growing private companies. The key issues typically fall into four categories:
Marketplaces allow anyone with shares and interest to transact, often outside the company’s oversight. This lack of visibility can lead to:
Moreover, once secondary trading begins informally, it can be nearly impossible to regain control. Each transfer introduces complexity in shareholder rights, investor communications, and voting power.
Secondary marketplace pricing is driven by demand, not fundamentals. When employees independently list shares, they may underprice or overprice equity based on market sentiment or rumors, not financial performance.
This creates a risk of distorted valuation references that can confuse future investors or complicate primary fundraising.
Unmanaged transfers can trigger securities law issues, especially around Rule 701, information disclosure, and insider trading.
Without proper legal and regulatory oversight, even small informal trades can expose the company to regulatory scrutiny or litigation.
Marketplaces broadcast trading activity. If employee shares are sold at a steep discount, it can signal internal instability or lack of confidence, even when untrue. Strategic investors or partners may misinterpret this data, affecting negotiations or partnerships.
An advisor-led approach prevents these optics by managing liquidity discreetly and professionally.
Working with an advisor such as F2H allows companies to transform a potential liability into a strategic advantage. Advisors bring institutional discipline, confidentiality, and alignment across stakeholders.
Rather than letting ad-hoc transactions dictate terms, advisors design and execute structured tender programs. These programs allow employees, founders, and early investors to sell a portion of their holdings under consistent terms and pricing.
Benefits include:
A well-run tender also reinforces confidence internally. Employees see liquidity as part of a thoughtful corporate plan rather than a reactive event.
An advisor ensures that all secondary transactions are synchronized with the company’s equity records, legal agreements, and reporting systems. This means fewer reconciliation issues and better visibility into who holds what—and why.
Through this structure, companies preserve governance integrity, avoid shareholder sprawl, and maintain optionality for future rounds or exits.
Executing secondary transfers involves coordinating multiple stakeholders: sellers, buyers, company counsel, and administrators. Each step—due diligence, transfer approval, payment, and settlement—must be managed with precision.
Advisors act as the project manager of the process, ensuring that every step is completed smoothly and efficiently while minimizing operational burden on the company’s finance and legal teams.
A well-designed secondary program often dovetails into a growth equity raise. Advisors can use the momentum and investor interest from a tender program to facilitate a concurrent primary capital raise.
This dual approach—liquidity for existing holders and capital for the business—creates a win-win dynamic. The company gains funding to accelerate growth while employees gain confidence in the long-term value of their equity.
Advisors serve as neutral third parties to balance the interests of boards, founders, employees, and investors. This ensures that all parties remain aligned on valuation, timing, and disclosure.
Instead of reactive liquidity requests from individual shareholders, the advisor creates a framework for ongoing secondary planning that the board can approve and revisit annually.
An experienced advisor does more than facilitate transactions. They add long-term strategic value through several critical areas.
Advisors have visibility into valuation trends, investor appetite, and deal structures across comparable companies. This market intelligence informs pricing, timing, and investor selection.
Establishing a company-wide secondary policy creates predictability and fairness. Advisors can help draft and implement policies that define eligibility, frequency, and approval protocols for liquidity events.
Advisors often maintain deep networks of qualified institutional buyers, family offices, and secondary funds. By curating the investor base, they help companies attract shareholders who add value beyond capital—strategic relationships, industry expertise, or future exit opportunities.
Structured secondary programs create transparency and discipline, both of which are critical when preparing for future institutional rounds or IPOs. Companies that proactively manage liquidity and investor relationships often command higher valuations and smoother exits.
Companies sometimes hesitate to engage advisors, perceiving the process as costly or unnecessary. However, the cost of poor liquidity management is far greater.
Without an advisor:
In contrast, the advisor’s fee is typically a fraction of the value preserved through proper governance, pricing, and execution.
Liquidity is a sign of maturity in a venture-backed company. However, how that liquidity is managed can either strengthen or weaken the business. Allowing employees to sell on open marketplaces may seem simple, but it introduces structural risks that compound over time.
Engaging an experienced advisor like F2H Capital ensures that liquidity events are handled with discretion, compliance, and strategic intent. From tender program design to growth equity raises, advisors enable management teams to focus on building the business—while protecting the company’s long-term value and governance integrity.
At F2H, we bring white-glove advisory to secondaries, capital raising, and M&A under $150m – delivering the sophistication of top-tier investment banking to small GPs, LPs, and companies. If you’re thinking of launching or managing a secondary liquidity program, contact us today to start the conversation.
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