Field guide
The language you'll need for a secondary sale
Term sheets and cap tables have their own shorthand. Here's what the words that show up most in a secondary transaction actually mean.
Most of these terms come from the primary fundraising process, but they carry directly into any conversation about buying or selling an existing stake — the clauses in your original paperwork are exactly what determines whether a secondary sale is even possible.
- Right of first refusal (ROFR)
- A clause giving the company — and sometimes its existing investors — the right to match any outside offer for your shares before you can sell to someone else. Most private company stock includes one, and it's the single biggest reason a sale can take longer than expected.
- SAFE
- A "Simple Agreement for Future Equity" — a common early-stage instrument that converts into shares at a future round rather than being stock itself. If your original investment was a SAFE rather than priced stock, that changes what you actually hold and what you can sell.
- Discount to cap
- When a secondary stake is priced below the valuation set in the company's last round. A 10–30% discount is typical, reflecting the buyer's reduced information rights and added risk versus a primary investor.
- Pro rata rights
- The right to invest additional money in a future round to maintain your ownership percentage. These rights usually belong to the original investor and don't automatically transfer to someone who buys your stake secondhand.
- Liquidation preference
- A term that determines who gets paid first, and how much, if the company is sold or wound down. Preferred shares typically carry one; common shares (often what employees and some early angels hold) usually do not.
- Accredited investor
- A legal status based on income, net worth, or professional credentials that's required to buy or sell most private company securities, including secondary stakes. Requirements and verification vary by country and by platform.
- Cap table
- The company's ledger of who owns what — every shareholder, how many shares, and what class. A messy or unmaintained cap table is a common reason secondary transfers get delayed.
- Tender offer
- A company-organized event where employees and early investors can sell a set amount of stock to approved buyers, at one price, on a defined timeline — different from a one-off private sale negotiated directly between two individuals.
That covers the terms specific to an angel's side of a secondary sale. The wider secondary market — fund structures, LP terms, pricing vocabulary — has a larger dictionary of its own; the Secondaries Explained glossary defines 55+ of those terms. To see how the words on this page play out in a real transaction, read the guide to how secondaries work.