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Comment by davidu | Hacker News Reader

The secondary markets for great companies are very liquid -- it's not an issue today for investors.

I ask this question out of ignorance. An angel investment in a startup would seem to me like a very illiquid asset. Do they just go down to a cocktail party and sell away their "angel shares" or is there some sort of structured market for this sort of thing?

Not that I really know either, but I found this useful:

http://www.kalzumeus.com/2010/09/02/new-trends-in-startup-in...

“You owe me $20, with interest. Don’t worry about paying me back right now. Instead, next time you raise money or sell the company, we’re going to pretend that I’m either investing with the other guy or selling with you."

So if indinero takes more money, the early investors could sell their hypothetical convertible notes to the new investors.

Typically you would not be selling the convertible note: that second clause is for the case where you sell the company without taking additional outside investment, in which case the convertible note owner participates in that sale as if they had an equity interest.

Angel investments are generally illiquid, modulo "you invested in Facebook or some other company which is so hot there is a secondary market and a term sheet practically causes fusion of surrounding hydrogen atoms."

There is certainly a structured market (secondmarket) for this. Also, many angels are now selling their shares in later stage financing. So its certainly more liquid now than a few years ago.

There is a structured market, and most angels are allowed to sell into future rounds (in addition to being able to sell more generally, with minimal restrictions usually being a ROFO and No Competitors clause)

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