Startup Funding Espresso Challenges in Secondary Sales
Challenges in Secondary Sales Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. There are several obstacles to overcome in completing a secondary sale. Here are some challenges to consider: Board approval -- In many cases, the company must approve any founder shares being sold.\xa0 Right of First Refusal -- companies that have raised funding have Rights of First Refusal on any offers of stock sales. \xa0 The company must sign off those rights to allow others to purchase the shares. Co-Sale Rights -- Investors may have Co-sale rights which require any purchasers of the company's stock to purchase an equal amount from the investors. Corporate Laws -- some states have regulations around the re-sale of the company's stock. Transfer restrictions -- some companies have restrictions on the transfer of stock and must approve any transfers. 409A valuation issues -- the company uses a 409A valuation to set the price for employee stock options.\xa0 Any secondary sales of the company's stock above that 409A price may increase the 409A valuation impacting the price of employee stock options. Review these issues before pursuing a secondary sale. \xa0 Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding. Let\u2019s go startup something today. _______________________________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0\xa0 For Feedback please contact info@tencapital.group\xa0\xa0\xa0 Please , share, and leave a review. Music courtesy of .