In a recent startup pitch event, I had the opportunity to serve as a judge, where one crucial question posed to entrepreneurs was, “Why do you want to startup?” Many responses were conventional, including aspirations to innovate, gain independence, and make a difference. However, a young woman stood out by simply stating, “I want to make lots of money.” Her candidness not only elicited laughter but also highlighted a significant concern: Is it ethical for entrepreneurs to sell part of their shares in a secondary market and build personal wealth while their startups face financial challenges?
First-generation startup founders often invest substantial passion and dedication, compensating for low salaries, extended hours, and intense personal risk. After years of navigating economic hardships, founders may grapple with the question of when it’s acceptable to prioritize their financial well-being and consider a secondary sale—essentially selling a portion of their equity before achieving profitability.
Critics who have not experienced the struggles of founding a startup might view this decision as questionable. However, the circumstances are far more complex. Founders are not isolated figures; they face both intellectual and financial challenges. For years, their wealth is predominantly tied up in illiquid equity, while other stakeholders, including employees with stock options and investors with diversified portfolios, possess varying degrees of liquidity and security. Expecting founders to maintain a high moral standard by avoiding early secondaries is arguably unjust.
Global figures such as Travis Kalanick, Mark Zuckerberg, and Brian Chesky have each engaged in partial stake sales via secondaries in their respective companies—Uber, Facebook, and Airbnb—prior to initial public offerings (IPOs). Similarly, prominent Indian entrepreneurs like Vijay Shekar Sharma and the Bansals have executed small secondary deals ahead of major corporate events, such as the PayTM IPO and Walmart’s acquisition of Flipkart. These examples illustrate that secondary sales are not only common but also understood within the market context.
Secondaries serve to diversify an entrepreneur’s financial risk. Conventional wisdom suggests that no one should invest entirely in a single, high-risk asset; thus, founders should also seek to mitigate their exposure. By establishing a financial cushion, founders can refocus their energy and commitment to their venture. While some argue that early secondary sales may reduce a founder’s dedication—referred to as having “skin in the game”—it can also be argued that a founder who has secured some financial upside may be better positioned to commit long-term.
Therefore, the discussion should center not on the fairness of secondaries, but rather on their timing and the status of the startup at the time of sale. Understanding the contextual factors at play when a secondary sale occurs will be crucial for evaluating its implications and appropriateness. Further exploration of these dynamics will be addressed in the next installment.
The author is a serial entrepreneur and the best-selling author of ‘Failing to Succeed’; he is active on X @vaitheek.
Published on April 13, 2026.
