A Guide to Founder Liquidity

If you’re running a fast-growing SaaS, tech, or AI firm, chances are most of your net worth is tied up in your company. That’s exciting — but also risky. A minority recapitalization lets you turn some of that paper wealth into real wealth, without giving up control.

Below is a deep dive guide on how founder liquidity minority recaps work — and how I did it personally at iContact. If content like this speaks to you... come join and participate in our SaasRise and VentureRise communities where we talk about topics like thus all the time.

A Guide to Founder Liquidity

How to Take Money Off the Table Without Losing Control

By Ryan Allis, CEO of SaasRise & VentureRise

In this Guide to Founder Liquidity I show how a SaaS/tech firm with $10M-$100M in ARR and good growth metrics (Rule of 40 or better) can sell a minority of their shares to a growth equity or private equity firm and take $10M to $200M off the table, de-risking while still controlling the majority of the firm.

Case Study: Taking $15M Off the Table Before Our Exit at iContact

Back in 2010, I was 25 years old and I was the CEO/Co-founder of iContact. I was young -- and annual revenue growth was good (about 90% per year).

At the time we had grown to $35M in ARR and we wanted to take some chips off the table after an “almost exit” to Salesforce that failed at the last moment (they bought ExactTarget instead).

We hired the investment bank Allen & Co. (the ones that run that famous Sun Valley confab) and they helped us with the round. We decided to raise growth capital for the business as well as sell some of our shares.

In August 2010, we closed on $40M of new funding from Baltimore-based growth equity shop JMI Equity, with $25M going to fuel further expansion – and $15M going to buy shares from the founders and early team members.

The early founders/team members, including myself, sold about 15% of their shares in that round at a $100M valuation.

I was able to personally get out $3M in that secondary round, life changing money for me at that young age of 25.

That $3M gave me financial peace of mind, while still leaving me with the majority of my shares — which later paid off in our $169M exit.

We were later acquired in Feb 2012 for $169M by a public company called Vocus – so everyone ended up doing well.

What Exactly is a Minority Recap?

What we did at iContact in 2010 with JMI Equity was called a minority recap as institutional investors were coming in (VC, growth equity, or PE) to invest in our firm allowing for partial liquidity, but without giving up majority control.

Minority Recap (n.) - A transaction in which a business owner or founding team sells a portion of their ownership stake—typically less than 50%—to an outside investor (such as a private equity or growth equity firm). The goal is to provide liquidity to founders or early shareholders while still allowing them to retain majority control of the company.

This structure allows founders to “take chips off the table” while still retaining meaningful equity upside.

Often, these rounds will include primary capital to the company balance sheet for growth and secondary capital used to repurchase shares from early shareholders and founders.

Sometimes, these rounds will be exclusively secondary capital if the company is profitable and doesn’t need further investment.

Founders do these rounds to de-risk personally, get peace of mind and reduce focus on an immediate exit, allow themselves to get enough out that they can now take a bolder bet with the company, and provide an incentive for loyal and valuable team members. It can also help bring in growth-stage investment partners who can help with scaling, professionalization, M&A, and IPO prep.

Many growth-stage VCs (Insight, Accel-KKR, General Atlantic, Summit, TA) are comfortable letting founders pull out $5M–$100M+ depending on ARR scale and round size.

Founder liquidity doesn’t happen in seed rounds or Series A rounds – but in Series B/C/D/E rounds or after you are EBITDA positive – it becomes a real possibility. A growing tech firm with $10M in ARR could take $5M in liquidity in a round for example – but a growing tech firm with $100M in ARR could easily take out $100M.

Other metrics like revenue growth rate, retention, net margins, market sector, and market size determine how much secondary growth equity or PE investors will allow.

Most entrepreneurs will say if you get the chance to take some chips off the table – do it – as it locks in a win while still keeping the majority of your upside and shares for a bigger payday later.

Founders often understandably worry about mortgages, taking care of their families, or being over-concentrated in one asset. This minority recap round can be a solution to all that – while socking away enough cash to ensure lifetime financial freedom and leave a second bite at the apple still ahead.

If you’re going to do a recap round like this, having the right investment banker to help you is everything. Reach out to us if you’d like our recommendations for the best investment banks at each ARR tier. The investment banks (sometimes called M&A advisors) will help you negotiate the best terms and a good valuation given your growth trajectory and metrics (tip: getting better terms often matters more than the highest possible valuation).

The right investment bank can ensure you don't get the wrong end of the stick with terms like liquidation preferences, cumulative dividends, negative covenants, option pool structure, board composition, and anti-dilution provisions -- all terms you can mess up without the right advisors.

By the way, we operate multiple mastermind communities for Tech CEOs and Founders. You can join the SaasRise community (for SaaS Founders $1M+ in ARR) or VentureRise community (for VC-backed CEOs with $5M+ raised) and we’ll help you get ready for this recap and connect you with the right bankers when ready. Plus you'll get in our private WhatsApp group and Slack channel and Circle community.

Now let's take a look at a number of SaaS firms that have done exactly this before -- you can use ChatGPT to research each transaction further.

Examples of SaaS Firms That Have Done Founder Liquidity Rounds

Here are some recent recap/founder liquidity rounds (2020–2025) of SaaS/Tech firms in the $10M-$200M ARR range we found in our research… and a few notable ones from the 2010s for context.

2020-2025 Era Recaps:

• Laurel (Time by Ping), Jun 2025, $20M secondary liquidity, $510M valuation, $26M ARR (19.6x)
• Element451, Dec 2024, $175M secondary liquidity, ~$12M ARR
• Wrapbook, Sep 2024, $20M secondary liquidity
• Hostaway, May 2023, $175M secondary liquidity, ~$15M ARR
• Deel, Feb 2023, $300M secondary liquidity, $12B valuation, ARR est. $200M (~60x)
• Cloudinary, Early 2022, ~$100M secondary liquidity, $2B valuation, $100M ARR (20x)
• ConvertKit, Feb 2022, $6.4M founder liquidity, $200M valuation, $29M ARR (6.9x)
• HighLevel (GoHighLevel), Nov 2021, $60M secondary liquidity, ~$15M ARR
• Lempire (Lemlist), Nov 2021, $30M secondary liquidity, $150M valuation, $10M ARR (15x)
• Duda, Jun 2021, $10M secondary liquidity, $200M+ valuation, $10M ARR (20x)
• Zapier, Jan 2021, ~$100M secondary recap, $5B valuation, $100M ARR (50x)
• Calendly, Jan 2021, $350M round (majority secondary), $3B valuation, ~$70M ARR (42.9x)
• Pipedrive, Nov 2020, $1.5B majority recap, $1.5B valuation, ~$90M ARR (16.7x)
• Supermetrics, Aug 2020, €40M Series B with secondary, $200M+ valuation, ~€20M ARR (10x)
  

2010-2019 Era Recaps:

• Kajabi, Nov 2019, minority growth investment, valuation undisclosed, ~$50M ARR
• Wistia, Jul 2018, $17.3M debt recap buyout, ~$100M valuation, ~$32M ARR (3.1x)
• Buffer, Jul 2018, $3.3M investor buyback recap, valuation undisclosed, ~$17–20M ARR
• RFPIO, Jul 2018, $25M growth + secondary, valuation undisclosed, ~$10–40M ARR
• GitHub, Jul 2012, $100M Series A mostly secondary, $750M valuation, ~$20M ARR (50x)
• Qualtrics, 2012, $70M minority recap, valuation undisclosed, ~$50M ARR
• iContact, Aug 2010, $40M Series B, $15M in secondary, $100M valuation, $30M ARR (3.3x)
• Atlassian, Jul 2010, $60M minority recap, ~$400M valuation, $59M ARR (6.8x)
• Squarespace, Jul 2010, $38.5M minority recap, ~$80–100M valuation, ~$8–10M ARR (8–12.5x)

These past deals are just examples of what’s possible (though the days of 20x revenue multiples from 2021-2022 might be over unless you're in AI and growing at 100%+ per year). Take the above exact numbers with a grain of salt as it's often hard to get accurate revenue and valuation data on private firms.

Make Sure You’re At the Rule of 40 or Higher

Of course, not every SaaS company qualifies for a recap. Investors will only consider secondary liquidity if you’re showing strong fundamentals — most importantly, the Rule of 40 (growth rate + profit margin ≥ 40). Without this, the door usually won’t open.

Mr. Market is very kind to those who appease the Growth Gods (so be sure to join and have your marketing team spend some time implementing the lessons from our upcoming B2B SaaS Growth Program starting Oct 16).

Helping You Get Ready for an Exit or Founder Liquidity Round

These days at SaasRise, I directly advise CEOs of growing technology firms who are wanting to either sell their company or do a minority recap round.  

We'll help guide you on the pre-exit or pre-recap checklist including getting your metrics, growth, financials, and team in shape --> then going to the right investment bank by ARR band and vertical that can get your deal done the right way (ones we've worked with before with our other members and clients and have consistently done a great job).

Often, the right introduction and the right moment can be priceless to getting the right investment partner.

Here’s the profile of firm I can help:

• Technology/software firms with $5M to $200M in ARR (bootstrapped or venture backed)
  
• Where Rule of 40 is at least 40+ (annual revenue growth plus EBITDA percentage) – and ideally 50+

If you’re a SaaS or tech founder with $5M–$200M ARR and you’re considering liquidity, join our SaasRise or VentureRise communities.

We’ll help you de-risk without giving up control — connecting you with the right bankers, helping you negotiate favorable terms, and preparing you to maximize both liquidity today and upside tomorrow.

We don't do the investment banking ourselves -- but we help you prepare and connect you to the firms that do.

You can reach out to me via the form here. Let me know what you're considering and we can schedule a time to chat later in September after I'm back from paternity leave.

You can also just reply to this email and ask any questions and I'll get back to you as soon as I can.

I hope you enjoyed this deep dive guide to founder liquidity from minority recaps and secondary transactions.

Join Our Mastermind Communities

If resources like these are helpful, come join and participate in our three weekly mastermind communities…

• SaasRise → for CEOs/Founders of SaaS firms with $1M+ in ARR
• GrowthRise → for B2B Marketing Leaders with $1M+ in ARR
• VentureRise → for CEOs of VC-Backed Firms with $5M+ Raised

What sets our communities apart is the experience level of the members and the quality of our content.