Definition
Primary Round
A primary round is a funding round in which the company issues new shares and receives the proceeds itself.
In a primary round, fresh shares are created and the capital goes onto the company's balance sheet to fund growth — contrasting with a secondary sale, where existing shares change hands and the company gets nothing. Most venture rounds are primary, sometimes combined with a secondary component for early-investor or founder liquidity.
Primary capital dilutes existing shareholders because the share count expands, whereas a pure secondary does not. Founders weigh how much primary versus secondary to include based on their need for growth capital versus liquidity.
Related terms
- Fresh IssueA fresh issue is the part of an IPO where the company creates and sells new shares, raising capital that goes onto its balance sheet.
- DilutionDilution is the reduction in existing shareholders' percentage ownership when a company issues new shares.
- Secondary SaleA secondary sale is the sale of existing startup shares from one shareholder to another, rather than the company issuing new shares.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.