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How do lock-ups work for founders and insiders?
A lock-up is an agreement not to sell shares for a set period after the company goes public. We generally recommend 12 months for founders and insiders, followed by gradual sales under Rule 144. Lock-ups show investors the people who know the company best are staying in, and they keep insiders' shares from overwhelming a thin early market.
Joel Arberman, Meraki Partners · Reviewed October 2026. Based on 17 companies taken public since 1999: 11 by direct listing, 4 by reverse merger and 2 by IPO.
Why have a lock-up at all?
Early on, a small public company's stock trades lightly. If founders and insiders could sell right away, even modest sales could push the price down and signal that the people closest to the business don't believe in it. A lock-up keeps everyone aligned while the company builds traction.
Who should be locked up?
Founders, officers, directors and other large holders. Investors in the private placement usually aren't, because their registered shares form the float the market needs.
What happens after the lock-up ends?
Insiders can sell under Rule 144, which limits affiliates to 1% of the shares outstanding in any three months and requires a Form 144 for larger sales. We advise selling gradually, if at all, and many founders wait much longer than 12 months. See when you can sell.
Is a lock-up legally required in a direct listing?
No. In an IPO the underwriter usually requires one. In a direct listing it is a choice, and we recommend it because it protects the stock and the shareholders.
Can a lock-up be released early?
It can be written to allow early release in specific cases, such as an acquisition of the company. Releasing it casually undermines the reason for having it.
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