I'm an advocate for founders taking money in secondary sale, says Freshworks founder Mathrubootham

Girish Mathrubootham, Founder Freshworks and Mithun Sacheti, Founder CaratLane. Chandra R Srikanth, Deputy Executive Editor, Moneycontrol

Freshworks founder and executive chairman Girish Mathrubootham has said he favours founders leveraging secondary sales of shares, as it allows them to meet important personal financial needs and enables them to focus on building and growing their companies.

"Most of us come from a middle-class background. We have not seen enough money in life. So first time when someone says they will buy you (our stake) for $5 million or $25 million, we think it is great outcome. That is the enemy.

“"I'm an advocate for founders to take some money from secondaries when their company is scaling, they should take some money to take care of pressing personal expenses like home loan etc... so that their mind is free to hit out big," Mathrubootham said.

He was speaking during a panel discussion with with Mithun Sacheti, former CEO and founder of CaratLane, at the Moneycontrol Startup Conclave in Bengaluru on August 9. They were discussing “Chennai Super Kings: Building, scaling, stepping back: The founder arc” in a session moderated by Chandra R Srikanth, deputy executive editor at Moneycontrol.

Founders selling their shares in secondaries has divided investors and founders as founders selling shares has been the trend with several new-age companies.

In May, Nazara Technologies founder Nitish Mittersain sold 6.38 percent stake to Plutus Wealth Management, a pre-initial public offering (IPO) investor in the company. While it sparked some debate in the startup ecosystem, Mittersain explained the move during the company's analyst call.

"As a promoter family, we have been running this company for the last 25 years. The way the company developed, we never had large amounts of liquidity in the past. So at some point of time, it was important for the promoter family to get some liquidity. The promoters will remain fully in control of the business," Mittersain said during discussing Q4 and FY24 results.

Swiggy co-founders Sriharsha Majety and Nandan Reddy, along with other employees of the food delivery company, plan to sell some shares in the upcoming employee stock ownership plan (ESOP) liquidity event programme worth $65 million.

Beauty and personal care brand Mamaearth's founders Varun Alagh and Ghazal Alagh also sold around 32.86 lakh shares of the 10.67 crore shares they held in the company.

Similarly, FirstCry's founder and managing director, Supam Maheshwari, divested 6.2 million shares in before filing for IPO in January.

Back in 2022, an epilogue from former BharatPe founder Ashneer Grover’s book Doglapan on X (formerly Twitter) sparked a debate among investors and founders.

Grover advised founders to prioritise their financial well-being and take advantage of every opportunity to liquidate their stock through secondary sales.

"As a general rule, at least 80% of the proceeds from any secondary sale should go to the founders. The remaining 20% can be allocated to ESOP (employee stock ownership plan) holders and angel investors," Grover said.