How to run a secondary

At Capdesk, we know secondaries. Here's a step-by-step guide to our favourite kind of liquidity event.





It’s no secret that companies in Europe are staying private for longer, raising hundreds of millions in rounds D, E, F and beyond. Naturally, as the timeline from incorporation to listing grows longer, private companies are finding new ways to utilise their equity, including the way they run secondary transactions.

Not a new concept by any means, secondaries have long been a popular method for “founder de-risking”, as Index Ventures’ Dominic Jacquesson puts it. “When a founder no longer stands to lose everything,” he told Capdesk, “they take more adventurous decisions with the business.”

But the landscape is changing, and the traditional secondary, whereby founders cash out and new investors jump in, is starting to look old-fashioned. Increasing numbers of high-growth, series A+ scale-ups are viewing secondaries more progressively: as an opportunity to reward early employees for their contribution to the business. For those who do, there are remarkable results.

Data management startup Duco recently organised a liquidity event for its entire option pool. “I had no idea how much people’s attitudes towards options would change once they were worth something,” said CEO Christian Nentwich.

Transactions aren’t simply a nice gesture towards employees, however. There’s a strong business case for secondaries that appeals to leadership teams and investors alike. Capdesk CEO & Co-Founder Christian Gabriel explains it well.

“One of the key challenges for business leaders today is employee attrition and staying competitive in the labour market. If you go to an investor with a plan for retaining your amazing talent by doing a £1 million secondary round every year, it becomes something investors want to look at.”

So there’s appetite, and ample justification, for running secondaries with more participants, and even running them at regular intervals. The challenge, then, is to do so without crippling your finance and people teams, as more participants means more paperwork, more internal comms, more legal considerations and lots more margin for error – if you’re handling the transaction offline, that is.

That’s where Capdesk comes in. Our digital secondaries product is designed for transactions of all different shapes and sizes, and minimises manual work at every step. A number of fast-growth private companies in a number of different markets around Europe have already run secondaries on Capdesk, discovering its benefits first-hand.

In this guide, we’ll take you through the five stages of a secondary transaction, and explain how Capdesk transforms the process.



First things first, you have a number of important questions to answer. You should work through these questions with an advisor if it’s your first time running a secondary, as each decision will have a material impact on the business. At Capdesk we call this the discovery phase.

Q. What kind of secondary do you want to run?

Secondaries can have multiple buyers and sellers on each side, or multiple sellers and a single buyer. You may have existing investors wishing to increase their stake or you might want to explore investment through a specific secondary fund. Alternatively, you could find willing buyers in a marketplace.

Q. Who will you invite to take part?

You’ll need to decide whether early investors, fully vested employees, partially vested employees, or some other variation of shareholders will be invited to participate.

Q. Is this a one-off transaction?

It’s important to communicate to participants whether this is a one-off opportunity to liquidate or not, so they can make an informed decision about taking part.

Q. What’s the share price?

You’ll need to set a share price for the transaction using the latest valuation. Alternatively, you can auction the shares off to the highest bidder.

Q. What’s the deadline?

If you’re working to a fixed deadline, you’ll need to work backwards from that to ensure everything’s wrapped up in time.

How Capdesk helps:

In the discovery phase, our experienced team will work with you to plan the secondary around your preferences. The platform supports all configurations, whether you’ve got a dozen participants or a hundred.

This is also when we’ll onboard your company to the platform – unless you’re already a customer. Our Customer Success team will digitise all your cap table data, minimising the risk of errors throughout the rest of the process. It’s a one-off process, and you’ll never need to do it again for future transactions.

Once you're onboarded, we’re all set to automatically update your cap table and shareholder register after the transaction, requiring zero manual changes on your side.


After the discovery phase, it’s time to prepare for the main event. You’ll need to configure the buyer and seller tables, line up your participants and finalise details such as share price, seller percentages and currency exchange rates.

On Capdesk:

Using the information provided in the discovery phase, we take care of preparation for you.

Our secondaries analyst configures the platform in line with your requirements, and helps you upload your legal documents – including power of attorneys, share purchase agreements and stock transfer forms – ready for use later.

At this stage we recommend your participants are invited to Capdesk so they can complete essential KYC checks ahead of the transaction.

Wherever your participants are based around the world, it takes just a few minutes to get them verified and ensures the secondary is run securely.


Preparing offline:

At this point in an offline transaction, the work can start to pile up.

You’ll need to enlist a law firm to prepare the legal documents, or ask your in-house legal team for support, if you have one. You’ll also need to get crystal clear with all participants on who is permitted to buy, who is permitted to sell, in what volumes and under which conditions.


You’ve made it to the main event – the secondary window is open and transactions are taking place.

You can structure the transaction so the sale window happens before your buying window, or run them at the same time. Consecutive windows give you an idea of sales demand, so you know what’s been committed before the buyers begin placing orders.

On Capdesk:

A lot goes on behind the scenes during the execution phase, which we’ve designed to be equally seamless for you as it is for your participants.

Once their window is open, sellers place sales orders and sign a power of attorney, giving you permission to complete the transaction on their behalf. Buyers go through the same process, also funding an escrow account. We support multiple currencies and exchanges so participants can use their preferred currency.

If employees are taking part in the secondary, they may need to exercise their share options. On Capdesk, we can facilitate this by running an online exercise window alongside the seller window. Employees simply log in, exercise their options cashlessly and sell them as shares. It’s one fluid motion that doesn’t require upfront capital from the employee.

Capdesk also ensures participants stay firmly in the loop throughout the secondary execution. Buyers and sellers receive automated emails updating them on the status of orders, funds, share transfers and more.


Executing offline:

Executing a secondary transaction offline can take many different forms; it really depends on how you’ve set things up with your lawyers. You might manage the buyer and seller orders in a spreadsheet, emailing back and forth with participants and having them sign printed documents.

Your employees would still need to exercise their options before selling, paying the exercise price to convert them into shares. Offline, this will probably need to be done separately, before the secondary can even take place.

Throughout this phase, it’s up to you how much and how frequently to communicate with your participants. Participants will want a degree of visibility over the process, which most likely means fielding a lot of requests via email.

All in all, it’s extremely challenging to run a secondary offline, but it is possible. Just be prepared to set a lot of internal resources aside to manage it.


Once the window closes, you’re on the home run – but not before drafting the transactions and getting all the paperwork signed to make the changes official.

On Capdesk:

With Capdesk, paperwork becomes paper-less – and involves much less work, too.

The platform automatically drafts transactions based on activity in the transfer window using the agreed drafting terms. Using the power of attorney, the company can then sign the transaction documents, such as share purchase agreements or stock transfer forms, which have been automatically created and populated in Capdesk with the relevant information, on behalf of all participants.

Whoever has been designated to sign and approve the transaction for your company will then click through the files and authorise them using DocuSign. Once that’s done, you’re ready to approve the release of funds from the escrow account. Capdesk’s controlled approach removes all settlement risk from your transaction.


Closing offline:

Similar to the execution phase, closing a secondary transaction offline depends on how you’ve structured things. If your participants haven’t signed power of attorney over to you they’ll need to consent to the transactions and sign all the documents themselves.

Either way, you’ll need to double-check the orders, match up the sales and the purchases and ensure transfers are going from and to the correct participants. This is a risk-laden process, and it’s extremely important the right volume of shares is transferred, and between the right buyers and sellers. Closing a transaction offline also comes with significant settlement risk, as you need to make sure participants don’t drop out of the deal before it closes, and that orders have been funded.


Time to complete the secondary. In this phase, sellers receive their funds, authorities are notified of changes, filing fees are paid and the company cap table and shareholder register are updated.

On Capdesk:

Using Capdesk, this stage happens entirely out of view and is managed by your dedicated secondaries analyst. The platform transfers money from the escrow to your sellers, minus any filings fees such as stamp duty in the UK, which is transferred directly to HMRC on your behalf. This typically happens within 24 hours of fund release approval.

Capdesk then files stock transfer forms with HMRC and electronically forwards the stamped forms to buyers once complete.

Your cap table and shareholder register are automatically updated with the latest company ownership data, and new share certificates are generated. Everything is published right away on Capdesk, so you and your stakeholders have an up-to-date view of all equity holdings.


Completing offline:

Without Capdesk, the completion phase can be drawn out. Fund release and transfer times will depend on where the funds are being held, and whether payments need chasing for each participant individually.

You’ll need to notify HMRC or local authorities yourself, submitting filings and paying any applicable fees, and sending the stamped stock transfer forms to all your buyers.

Finally, you’ll need to update your cap table and shareholder registers, however you track them, and ensure everybody at your company has an updated version of the document.


That brings us to the end of a deep dive into secondary transactions. As you’ve hopefully seen, secondaries can be a serious undertaking, especially if your company is doing the right thing by inviting early investors and employees to take part, driving up the number of participants. However, with Capdesk, the process is transformed.

Your team are supported each step of the way, your participants have a slick and painless experience, your company ownership data stays clean and current throughout and your secondary is handled securely, professionally and compliantly.

Ready to find out more?
Speak to our Secondaries team today