

Ask HN: How do I find a buyer for private shares? - jgallant

A few years ago, I helped get a startup off the ground with a few friends. As a result, I was given 2% of the company. Since then, the company has received roughly $8 million in capital, and as a result my shares are worth something on paper. I am no longer an employee, as I learned that living to work wasn&#x27;t for me.<p>Long story short, I have a decent chunk of shares of a private company that I wish to sell. I&#x27;m in Canada, but the company is incorporated in Delaware. I have approached the CFO about selling my shares in the past, and he put me in touch with someone who would &quot;get back to me.&quot;<p>Are there any companies (Sharespost?) or brokers that handle these sorts of things, or am I stuck trying to find a buyer on my own?
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tptacek
You probably can't. Private companies are picky about who they let on their
cap tables. That's what makes them "private".

The first thing people bring up when people ask this question is ROFR, but I
think that may get your hopes up. ROFR suggests that the issuer might be
forced to match whatever price you find for your shares in the market. Put
aside for a second how hard it will be to get a price for those shares.

What's (I think?) a little more likely to be a problem for you than ROFR is
that your shareholder agreement probably more or less prohibits unauthorized
transfers of company stock. Boilerplate agreements have clauses requiring
board approval for transfers.†

Finally: it's awfully hard to sell shares in a business without being able to
disclose the numbers for the business. But you probably won't have the
applicable numbers: revenue, projections, expenses.

The stories you hear about private shares being sold in secondary markets
usually involve gigantic runaway successes, like Twitter. A company having
raised 8MM absolutely does not mean your shares are worth anything on paper;
the money the company took from investors was pledged to growing the company
as a condition of the investment.

† (good:
[http://www.nycbar.org/pdf/report/uploads/20071830-TheEnforce...](http://www.nycbar.org/pdf/report/uploads/20071830-TheEnforceabilityandEffectivenessofTypicalShareholderAgreementProvisionsforweb.pdf)
)

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jacquesm
Offer your shares to the other shareholders first, chances are that you are
required to do so anyway because of the shareholder agreement you presumably
signed and/or the minutes & bylaws of the corporation. They are also the most
likely buyers so besides the fact that you are likely obliged to do so anyway
it makes good sense.

Valuation will be a problem, but you could use the last transaction as a
starting point (and therefore a floor), the high end depends very much on the
state of the company (growth and turnover in that order).

Just the fact that the company received an investment does not automatically
mean your shares are worth something, for instance, if the company is about to
tank they'll be worthless, it all depends on how the company is doing.

Good luck!

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tptacek
The holder of a small minority stake in a company almost certainly can't use
the company's valuation at its last investment round as a floor, because that
valuation set the terms of a specific sale of stock under a specific set of
terms (board seat, antidilution, preferences, &c), which the minority
shareholder isn't in a position to offer to anyone else. The VC valuation was
also the product of due diligence and access to information that no minority
shareholder could share with an outsider, which adds a huge amount of risk to
the sale, which you'd expect to see taken out of the value of the shares.

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JSeymourATL
Finding buyers: the market at this stage will be other shareholders &
principals. Assuming you're on speaking terms with your old friends, start
with them.

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chadkruse
+1 on starting with your old friends. The one time I was in this position I
called the founder and quickly learned it wasn't going to be worth the effort.
Saved them an unnecessary distraction and saved me from counting money I
didn't have.

If the company is doing well though, they'd be decently motivated to get some
shares out of the hands of a former employee and into the hands of an insider
(namely, their VCs).

