Why it happens · Early investors & angels
Early investor & angel liquidity
An angel or seed fund that wrote a check years ago is often the most price-insensitive seller in the market — any exit at a meaningful multiple looks good relative to the tiny entry price. These sellers use secondaries to de-risk a concentrated bet, return capital to their own backers, or simply free up time and attention from a company they no longer actively support.
Worked example
A worked example of an angel partially cashing out (illustrative figures):
- An angel invested $50,000 at a $2.00/share seed price, buying 25,000 shares. Several rounds later, the company's last primary round priced at $40/share — the position's paper value is now $1,000,000.
- A secondary buyer offers $32/share (a 20% discount to the last round) for half the position: 12,500 shares, for $200,000.
- Against the angel's original cost basis for those shares (12,500 × $2.00 = $25,000), that sale alone returns 8x — even after accepting a 20% discount to the headline valuation.
- The angel keeps the remaining 12,500 shares for further upside, having already de-risked the position and returned capital to their own backers if the check came from a fund.
See every reason a secondary sale happens, or go back tohow a deal actually works step by step.