Founder liquidity refers to the practice where founders sell a portion of their shares during a new funding round. This allows them to "take chips off the table," securing personal financial stability while continuing to build the company with a fresh influx of venture capital. This practice is often kept under wraps, discussed in closed boardrooms, and only briefly mentioned in investor updates. You would really only know this happened if you were a founder, investor, or had direct access to the cap table.

Why is it a secret that founders get liquidity in many venture rounds? Because it undermines the narrative of the founder who is "all-in." The story of the founder who mortgaged their house and lived on ramen noodles for years is compelling. It garners admiration and sympathy, attracting top talent willing to work for lower salaries in exchange for a piece of the pie. If it were widely known that founders could de-risk their financial position while their employees remained all-in, it might change how startups are perceived and valued.