So you’re interested in selling your equity?
As companies stay private longer than ever1, the need for pre-IPO liquidity has become increasingly important for early shareholders, especially early employees.
While the secondary market used to be opaque and fractured, platforms like EquityZen have emerged to help shareholders and companies achieve liquidity for their private company shares in a transparent, compliant, efficient, and cost-effective manner. These transactions help alleviate much of the uncertainty for shareholders that comes with holding substantial private company equity while providing longer-term optionality and operational ease for private companies.
Why do shareholders seek liquidity? There are many reasons, but here are some of the main benefits:
- Fund Life's Milestones
- Buy a new home, plan your dream wedding or start a family. Companies operate on their own terms and timeline when it comes to liquidity programs and IPO plans. You don't have to put your life on hold.
- Diversify Your Portfolio
- Take control of your personal portfolio. Get liquidity to invest elsewhere or to save. You don't need to bear the risks of having your net worth tied up in the shares of one company.
- Gain Financial Independence
- Get cash to pay down your student loans, cover your mortgage, or fund your child's tuition. Working for a private company shouldn't mean you have to take on more debt.
- Exercise Options with Confidence
- Exercise with a clear path to liquidity. Companies often provide only 90 days to exercise your options after you leave. You have earned your shares, you don't need to choose between letting them expire and the uncertainty of exercising without an IPO on the horizon.
How does selling work with EquityZen? We can help you get started in 5 steps.
- Sign up and provide your equity details. We will reach out as soon as we have active investor demand.
- Approve your equity to be listed for sale after our team has performed a pricing and valuation analysis based on proprietary research and extensive transaction data.
- EquityZen confirms investor demand by collecting indications of interest and creating an investment offering on our marketplace.
- We work with the company directly to seek approval of the sale and ensure a smooth transaction process.
- Receive sale proceeds once the required documents are executed and the transaction is completed.
Interested in exploring pre-IPO liquidity on EquityZen's marketplace?
This article is going to help you get started with step one - Signing up and providing your equity details.
Once you’ve set up your account, you can create a sales inquiry. This is a non-committal target you are setting for what you’d like to sell, which is added to our inventory. It provides us with a general range of information to get us started.
You do not need to be an accredited investor to sell your shares on EquityZen.
Follow the steps below to create a sales inquiry
- Review the confidentiality agreement. Scroll all the way through it to review and select ‘I agree’ once complete.
- Search for the company you are looking to sell shares of. Our investors are typically looking to invest in late-stage private technology companies that have secured at least $50M in funding from top-tier venture capital firms, often having raised a Series B or beyond.
Start typing in the company you are looking for to move forward. If you do not see your company listed but believe it fits these criteria, please reach out to support@equityzen.com with the name of the company, its website, the number of units you hold, and whether you hold shares or options.
- Confirm the type of shares you have. Do you have common or preferred shares? If you don’t know, that’s completely fine! We can help you determine this later.
- Common Stock - A type of equity security most frequently issued to founders, management, and employees. In a liquidation event, preferred shares generally take priority over common shares.
- Preferred Stock - A type of equity security that has certain rights over common stock. These rights may include but are not limited to, liquidation preferences, dividends, anti-dilution clauses, and managerial voting power. These types of shares are typically issued to investors in companies.
- Confirm if the equity that you own is a Restricted Stock Unit (RSU). RSUs are a class of stock that has some restrictions on their transfer or sale. Generally, most non-public stock has some restrictions, though they may vary depending on the company and holder. If you don’t know, it is probably not a restricted stock unit. You can select ‘No’ and we can always sort this through later.
Learn more from EquityZen about RSU’s here.
- Confirm the number of shares you own. Please include both the total options and the total exercised shares. This can be changed later, but it’ll give us a better idea of the range.
Now that you’ve recorded your shares in our system, you can specify which of these shares you would like to move forward creating a sale inquiry for.
- Click ‘Create a sale inquiry’.
- Set the sales price and number of shares you’d like to sell. Pricing for private shares can be tricky to figure out. To help you quantify the potential value of your shares, try using our pricing tool.
IMPORTANT: The projections or other information generated by this tool regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. There is no guarantee EquityZen will be able to find, or will approve, a buyer at your desired price.
EquityZen has created this tool to assist shareholders in determining the potential value of their private company shares in the secondary market. The calculated current valuation takes many factors into account, including the (i) liquidation preference rank, (ii) liquidation preference amount and (iii) participation preference, if any, of each class of stock in order to determine how the proceeds of an acquisition would be distributed and the resulting impact on the share price. The results may vary with each use and over time.
- Review the share price, number of shares, and estimated net proceeds, and then click ‘Submit’. Great! You’ve submitted a sales inquiry. This information is now in our database as a potential investment opportunity for our network of over 300,000 accredited investors.
Going forward, our team will monitor interest from investors. When we are prepared to pursue a transaction with sufficient buyer demand, we will follow up with you directly.
What’s next? If you want to get ahead, you can start uploading your documents within your My Equity dashboard; however, this is not required at this point.
Our minimum transaction size is $175,000. Because the prices of shares fluctuate in our market, the number of shares necessary to meet this threshold is subject to change. Even if you are not sure whether you hold enough equity to meet the minimum size, please go ahead and continue with the sign up process. There may be an opportunity to group a few shareholders together to meet the $175,000 minimum.
Frequently asked questions:
What do I do after I list my equity? I don’t see a live offering available.
Listing your equity on our platform does not automatically push it forward as a live deal for our investors. Once you list your equity and provide details about your selling interest, our team will review your inquiry. If we think we can sell your shares on the terms you have specified, a member of our team will reach out directly to you. We will then work with you through the necessary steps to set up your sales inquiry as a live deal.
Are there sales fees?
EquityZen typically charges sellers a 5% fee when the transaction closes. Fees may be reduced for larger sales. The Placement Fee is paid to EquityZen Securities LLC ("EquityZen Securities"), our SEC-registered affiliated broker-dealer and member of FINRA.
Where possible, your Placement Fee will be netted from the purchase price for your shares, which is held in an escrow account. This means that at closing, you will receive the purchase price for your shares less any Placement Fee that is due. The Placement Fee will be held in the escrow account, pending closing and satisfaction of other applicable contingencies. The Placement Fee will then be released from escrow to EquityZen Securities.
Where netting of your Placement Fee is not practically feasible, your Placement Fee is required to be paid immediately upon closing of the sale of your shares. The precise mechanics will be disclosed further in the Placement Agreement you sign in connection with the sale of your shares.
What if I don’t have all of the documents requested?
The documentation we request is typically found in the cap table management software used by the company whose shares you wish to sell (typically Carta or Shareworks). If you can't locate all of the documents requested, don't worry - just upload all that you can, and if we are able to source a deal for you, a member of our team can work with you at that point to help you source the remaining necessary documents.
How do you price shares?
We use the last financing round of the company as a benchmark for the share price. Other factors that determine the price are publicly available information, investor demand, pricing history from past secondary transactions, etc. Typically, EquityZen works with the seller to determine the price per share for each investment opportunity. You can find out more about our process in this article.
See more Shareholder FAQs here.
Interested in exploring pre-IPO liquidity on EquityZen's marketplace?
