"The payout came via secondary sales, which entail investors purchasing shares held by the founder or others involved early in the startup's existence. Such sales mean that, when a startup announces a funding round, the company itself often receives less money than what is touted in a headline. It also means that, rather than waiting years to convert their shares into cash, the founder is suddenly very rich."
"This is not necessarily a bad thing. In response to a request for comment about Azizi's windfall, a Mesh spokesperson pointed to recent achievements, including a PayPal tie-up and the launch of an AI wallet, to suggest the company is doing very well. Still, founders cashing out early via secondary sales-a common feature of the current bull market-enables some founders to amass fortunes before their company has really proven itself, which of course it may never do."
Startup and crypto founders increasingly use secondary sales during venture funding to convert equity into cash, allowing early large payouts. Mesh founder Bam Azizi raised an $82 million Series B that included at least $20 million paid to him via secondary sales rather than new capital for the company. Secondary transactions mean headline funding totals can overstate company proceeds while enabling founders to access wealth before long-term success is established. Defenders point to operational milestones like partnerships and product launches. A strong crypto bull market and rising Bitcoin prices have amplified similar early payouts across startups, raising incentive and culture concerns.
Read at Fortune Crypto
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