Opinion
Selling isn't the only way to get pre-exit liquidity
A recent argument made the case for secondary sales as the answer to pre-IPO liquidity. There is a second tool, more selective, that is largely missing from the conversation, and it applies whether the exit comes as a listing or an acquisition.
The latest OpenAI tender offers have made the pre-IPO secondary market impossible to ignore. They have also surfaced its main cost: every share sold ahead of a listing is a share that does not participate in it.
What is largely missing from the conversation is a second tool aimed at a narrower audience: pre-exit financing. Instead of selling shares, the shareholder borrows against them. The position stays on the books. The loan is repaid out of the eventual liquidity event, whether IPO, tender, or acquisition.
The size of that cost is what the secondary conversation rarely surfaces. The listing pop, the post-IPO rerating, and the lock-up release are all events from which sold shares are absent. On the M&A side, any control premium a strategic buyer pays over the last private round accrues to whoever holds the shares at signing. Selling 20 to 30 percent of a position 12 to 18 months before an exit can leave material value on the table if the event performs. A loan against the same shares preserves that exposure.
For Israeli founders, the argument is sharper than for US peers. The path from founding to listing has stretched well past a decade for most successful Israeli companies, longer than the US average. By the time a credible exit window opens, the founder's personal liquidity question has often become a family one. The choice between selling forward and waiting is real, and it lasts longer here than almost anywhere else.
How it works
The most common institutional structure is a non-recourse or limited-recourse loan, secured by the pledged shares, with loan-to-value typically in the 25 to 30 percent range against a conservative reference valuation. Typical tenor is 18 to 24 months, often with a 12-month extension option, designed to span the exit timeline whether the path is a listing or a sale process. In practice, that means a borrower with a $40 million position can typically access $10 million in liquidity while keeping all upside on the full position through the exit. If the eventual liquidity event values the shares above the loan plus accrued interest, the shareholder repays from the proceeds and keeps the residual. The non-recourse feature caps the downside: in the rare case where the realized value falls short of the loan, the lender's recovery is limited to the collateral and the shareholder bears no further personal liability.
Who it isn't for
This is a narrower tool than secondaries, and the wrong audience wastes everyone's time pursuing it. Lenders underwrite two things before anything else.
The company: Mature, late-stage, recognized recent valuation, broad institutional ownership, audited financials, and either a credible path to liquidity in 12 to 24 months or robust secondary market liquidity in the shares. Series A and B shares are generally not financeable. Series D and beyond, in companies with visible exit momentum, usually are.
The position: Structuring this kind of loan involves legal work, valuation work, and ongoing monitoring. Lenders need the deal to be worth that effort. In practice, the minimum single loan size with institutional lenders is around $10 million, and most prefer total facility sizes of $25 million and above, reached either through a larger single loan or by pledging multiple positions in a basket structure.
Early stage, soft valuation, or modest position: not the right route. A secondary sale, a company tender, or waiting will serve better.
Two questions before exploring this
Do the company's transfer restrictions permit a pledge of shares as collateral? Some shareholder agreements treat a pledge as a transfer requiring consent. The answer settles the matter before any commercial discussion.
How does the decision look against a flat or down exit? In 2025, the median US software IPO priced about ten percent below its last private round, and down rounds across all venture-backed financings reached 15.9 percent, the highest in a decade. Whether the path is a listing or a sale, the trade-off has to be stress-tested against that kind of outcome, not the headline valuation.
The point
A secondary sale converts the position to cash. A loan against it converts part of the position to cash while keeping the shareholder fully in the deal. The first answers today's question. The second is the only one that also answers tomorrow's, when the exit finally comes.
For founders and senior shareholders at late-stage Israeli companies with significant positions, that second answer has been the missing chapter. For everyone else, the secondary market remains the right tool.
This is general commentary only, not investment advice. Konstantin Jeszenszky is the Founder and Managing Partner of Northstar Advisory AG, a FINMA-registered Swiss advisory boutique.
