There was a presentation that the ACA meeting about secondary purchases. It was pitched in a positive way for angel investors, however historically, these transactions have been at a significant loss–10 cents on the dollar was the going rate during the Tech Wreck. Last recession, the buyers typically targeted at investors who had liquidity problems and needed to generate cash by selling startup-company stocks or to get out from under coming capital calls to venture funds. There have been transactions where angel investors get liquidity at a premium, usually when a large venture firm or private equity fund leads an up round and buys out some of the earlier investors. There’s an argument that this latter type of transaction ought to become more common with more investors that have large funds and need to put more money to work and exit valuations down, so there’s more need to buy a larger portion of the company, That’s balanced by a historic strong prejudice (at least on the East Coast) against early investors exiting while the company is private because its is negative signal about the company’s prospects. It will be interesting to see how much that changes.

Was there any talk about establishing some kind of market for illiquid securities? Fred Wilson has been talking about this on his blog lately.

Thanks for the comment and the link to the post. The quote from me is correct, and Basil Peter’s analysis is interesting but has a flaw: not all venture capital firms are “average.” If angels have a blind strategy toward co-investment partners, they will run into the clash of interests he describes with VCs as well as other investors. However, picking your partners judiciously and aligning their capacities and interests with a particular company’s needs and goals can work well. We mostly co-invest with VC funds between $50M and $200M and other angel groups; but we also have had successful relations with larger firms when the situation merited working together.

James, I quoted your ACA panel discussion in the comments to http://tr.im/kBAP … hope I got it accurately.

Will Indest
Columbus, Ohio