Kaisa Luht was among the first team members to join Salto X. Before that, she spent 7 years at Wise, joining the company (then named Transferwise) in 2015 while it was only 400 employees large and supporting its growth to 4,000 people.
As Wise’s Reward Lead (Equity and Global Mobility), Kaisa helped the company organise multiple secondary sales that led up to an IPO in July 2021. Wise’s shares opened at £8 each, valuing the company at £8 billion (growing to £11 billion by the end of the first trading day). The IPO made Wise London's biggest tech company by market capitalisation.
Today, however, we aren’t here to talk about Wise’s IPO as much as the secondary sales that preceded the big event. That’s because in 2024, the pre-IPO employee liquidity events are on track to become the new trend of private startup investments.
Together with Kaisa, we’ll be discussing the state of the European secondary sales market, as well as looking back at its development over the past few years. Toward the end of the interview, Kaisa will share her 10 questions for startup employees who might consider selling some of their equity in a pre-IPO private sale.
Hi Kaisa, and thank you for being up for this interview. Could you tell us a little bit more about your role in Salto X and what your job title Reward Lead means?
I joined Salto X in 2022 as a Global Reward Lead. My goal here is to put all my knowledge about startup equity and secondary private market sales to the best possible use. It’s not just me: our entire team is working towards building a better investment ecosystem for European startups and employees.
My mission of simplifying stock options for startup employees has led me to the opportunity to help create a product that simplifies stock options for everyone: founders, HR, recruiters, and the rest of the team.
As Salto X is still a small early-stage startup, my role doesn’t end with the tasks that the Global Reward Lead would do. I help with everything that contributes to making our mission a reality.
Could you say a bit more about the company’s mission and what you’re currently building?
Our product has changed over time but our main mission hasn’t changed: helping employees understand and receive value from the startup equity program.
Recently, we began working on a new service: supporting startups with pre-IPO secondary market sales. I am very excited about this as there is a huge need for greater employee liquidity in the European startup ecosystem.
What is your general opinion on secondary sales? Are they good or bad for companies and employees?
Having participated in several secondary sales at Wise – both as part of the organising team and as an employee – I’ve had a very positive experience with such liquidity events. That is partly why I’m so excited to be working on a product that simplifies launching secondary sales as a startup.
Organising a secondary sale is a considerable investment of time and energy from a lot of people in the company. However, if a company is willing to invest time and resources into making secondary deals happen, its credibility and employer brand will immediately increase.
By organising secondary sales, private tech companies can indicate to their employees and investors that their share options have an actual, monetisable value. Just think about it: if, as an employee, you’d know that you’ll have an opportunity to turn some of your stock options into money, you’d be more driven to contribute to the company’s success.
The secondary sales sounds like a startup employee’s dream come true…
Indeed. For employees, the secondary sales can be life-changing events that, quite literally, allow them to make their dreams come true.
I myself used the money received from Wise’s secondary sales to get married as well as to purchase my first flat.
It’s also worth mentioning that people who receive a considerable amount of money from secondary sales often want to diversify their investment portfolios. And this can lead to further investments in other startups. One startup’s secondary sale can become the seed of multiple other startups.
Let’s talk about Wise’s secondary sales for a moment as this sounds like the perfect example of this being done right.
For many people at Wise, launching the first secondary sale in 2017 was the first time we’d done it. During my time in the company, there were three secondaries in total: in 2017, 2019, and 2020 (Wise was founded in 2011).
The main reason for these sales was to give liquidity to the early investors and employees, as well as bring new investors on board.
Interviewer’s note: With every secondary sale, Wise also boosted their valuation. In 2019, Wise raised $292 million and its valuation grew to $3.5 billion, a significant increase from its 2017 valuation of $1.6 billion. During the 2020 private investment round, the company’s valuation reached $5 billion.
You’re really making the secondary sales sound like a must-do for any successful private tech company. Where’s the catch? Why aren’t we hearing about more of these?
I think secondary sales are quite difficult to organise, they take a lot of time and human resources from the company and might become a distraction from the company’s main mission.
However, I believe that the more secondary sales get positive media attention, the more companies will start to think about doing them. I very much hope the trend will take off in the coming years.
Are there any upcoming secondary sales that you’ve heard about and are looking forward to?
There’s been a long silence on secondary sales for some time now, though just recently Stripe had a secondary sale.
Interviewer’s note: Stripe’s private investment round took place in January 2024. The sale valued the startup at $53.65 billion, a small uplift from March 2023 when the company raised $6.5 billion at $50 billion valuation – a fall from its $95 billion peak in 2021.
Assuming that the startup investment market will warm up in 2024, let’s talk about some tips and advice for companies looking to organise a secondary sale this year.
In my experience, finding the right partners is the key to executing the sale well. You are going to need legal help as well as the right kind of buyers whom you can trust.
In Salto X, we aim to be the one-stop partner for startups that advises but also provides the toolset for organising secondary sales and managing the cap table. Our team has long-term expertise in the European startup ecosystem, as well as lots of VC connections. That’s why we’re able to connect high-potential startups with the best investors.
This sounds very exciting. So as a startup looking to launch a secondary sale, I can simply reach out to you and ask for help?
Yes, that’s exactly how it works. Of course, we can’t guarantee that your company is 100% ready for a liquidity event. But if all signs align, we are happy to be the partner guiding you through the entire process.
Let’s also talk about the employee side of things. Imagine I’m a startup employee and would like to sell my shares. Should I prefer a secondary sale or wait until the IPO?
It is important to understand that you cannot sell your shares at any time. Employees can sell their equity only during secondary sales or wait until the IPO.
There are many considerations that an employee should think of before deciding to sell their options, from taxes to the selling price. You could consult a financial adviser or tax expert to get a better understanding of your unique situation.
Are there any specific questions that would help an employee decide whether to sell their equity during a secondary sale?
It all comes down to the employee’s personal circumstances and the company’s long-term outlook. Here are some questions that I would be asking before selling my equity in a fast-growing startup.
- Do I believe this company's share price will continue to increase? If yes, do I really need to cash out now, or do I want to wait for a higher price selling point in the future?
- How far away do I think an IPO might be?
- Do I only hold options/shares in one company? Should I think of diversifying my portfolio?
- Do I need money right now, e.g. for any big life events? Buying a flat/house, getting married, etc.
- Are the tax conditions the best they can be for me? For example, in Estonia, if an employee waits 3 years before exercising options, the tax conditions are more favourable than when they exercise before 3 years from signing the grant agreement.
- Am I planning on moving to another country which might complicate my taxes on options?
- Do I believe that the company will provide similar selling opportunities for me in the near future?
Thank you, Kaisa! There is only one last thing I’d like to ask you: a prediction about the European startup ecosystem in 2024.
My one prediction would be that we will be hearing about quite a few secondary sales and IPOs this year. I think the market is ready to get more lively again.