Paul Martino has an unusual strategy for a venture capitalist: He cashes out early, offloading as much as much as 30 percent of his stakes in startups for the right price.

The founder of Bullpen Capital, who booked a gain of more than 5,000 percent on one of his original investments, acknowledges that tech investors have typically held off selling until a startup went public or was bought by a rival.

“This was frowned-upon behavior, but now it’s becoming more commonplace,” said Martino, whose firm holds stakes in startups including fantasy-sports firm FanDuel. “This is the world we live in now.”

With Silicon Valley startups staying private longer these days, investors, company executives and rank-and-file employees are increasingly eager to cash out early. In recent weeks, growing fears of a bubble have given insiders even more incentive to sell their shares. Typically company founders try to limit such transactions, but a cottage industry has sprung up to help facilitate the sales on the quiet.

Facebook Effect

Selling shares early isn’t entirely new. Before Facebook Inc. went public in 2012, a secondary market emerged that helped early employees and investors cash out to buy houses, cars or build a nest egg. A network of brokers helped facilitate the private deals, and firms such as DST Global Ltd., run by Russian billionaire Yuri Milner, were eager to amass positions in the growing social network.

After Facebook’s experience, many startup founders put more restrictions in place allowing companies to block secondary sales. To keep control over who has a stake in their business, startups are instead organizing their own periodic offerings where employees and early investors can cash out. Martino said startup founders occasionally ask him to sell so late-stage investors can buy in.

The process is needed because founders have less incentive to go public than even a few years ago: There’s lots of capital sloshing around, regulators no longer require startups to go public once they’ve reached a threshold number of investors and because it’s cheaper to build companies from scratch -- lessening the need to raise funds from the public.

Many of the current crop of promising startups -- among them Palintir, Dropbox, Flipboard -- have reached or surpassed their fifth year of existence. That’s when early employees increasingly need the cash, said Mark Dempster, a partner at Founders Circle, which buys officially sanctioned secondary shares.

Life Milestones