Chainguard’s recent $356 million Series D, led by top-tier investors like Kleiner Perkins, IVP, and Salesforce Ventures, marks a major milestone for the cybersecurity startup. With a new $3.5 billion valuation and momentum building across their product suite, the business headlines are impressive on their own.

But behind the scenes, a lesser-known opportunity is now front and center for Chainguard’s founders, early employees, and investors: the chance to preserve tax-free treatment on their equity gains through Qualified Small Business Stock (QSBS) and QSBS rollover planning.

Chainguard was founded in October 2021. Assuming it was structured as a C-Corporation from inception, the equity issued to early team members likely qualifies as QSBS. Under Section 1202 of the Internal Revenue Code, QSBS can allow shareholders to exclude up to 100% of capital gains on qualified stock (up to $10 million or 10x their basis) from federal income taxes.

*Pulled from* *Fortune, photo via Chainguard (CEO, Dan Lorenc)*

To claim this powerful exemption, however, shareholders must hold the stock for at least five years.

Here’s where things get interesting. If any Chainguard insiders, founders, employees, or seed investors, took money off the table during the Series D through secondary transactions, they may now face a significant tax bill. With a holding period of only about 3.5 years, those shares would fall short of the five-year QSBS requirement.

But there’s a solution.

Under Section 1045 of the tax code, sellers can preserve their QSBS benefits by reinvesting their sale proceeds into another QSBS-eligible company within 60 days. This move allows them to defer taxes today and restart the QSBS clock, ultimately still positioning them for tax-free treatment down the road.

(Identify a low-risk rollover solution and utilize rollovers as a $300M+ tax-free boon.)

So, let’s say a founder sold $3 million worth of shares during this Series D. Without action, they’d owe federal capital gains taxes, net investment income tax, and potentially state taxes. But if they roll those proceeds into a qualifying new startup within the 60-day window, they can avoid all of those taxes entirely—as long as the new stock meets the same QSBS criteria and is held for the remainder of the five-year period.

The rollover mechanism gives early stakeholders a second chance. They don’t have to choose between liquidity and tax benefits. With the right planning, they can unlock cash today and still protect the powerful upside of QSBS now and for the future.

Chainguard’s rise is impressive. But for insiders who know how to navigate the tax code, the real win might still be ahead.

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You could benefit from a QSBS rollover if:

You recently sold QSBS before the 5 year minimum hold period
You recently sold QSBS that you held for 5 years, but your gain exceeds $10M
You’re considering an exit in the next 1-4 years and want to think ahead about tax planning
Are an angel investor seeking flexible QSBS opportunities to help defer gains

The Vint Retail Partnership Program can be a solution for QSBS gain holders in need of a flexible, low-risk, and relatively liquid QSBS opportunity. Get in touch with our team today to learn how to partner with us and potentially save millions in gains tax from a stock sale.

Here are some of the questions we typically ask when having a first meeting with potential partners:

Did you recently sell or are you holding Qualified Small Business Stock?
When did you sell your stock?
Was this your first liquidity event?
Are you a founder, early employee, outside investor/angel, etc?
Are you certain that your stock met the Active Trade/Business and other requirements under Section 1202? (Outside of holding period requirements)
What is your intended rollover amount?
How long did you hold your initial stock?

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