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.
Where this goes wrong
Angels often anchor to the last round's headline valuation and are surprised by the price on offer for common stock. The gap reflects share class, size, and the buyer's required return — not necessarily a poor view of the company. Anchoring to the wrong reference point is the most common reason a sale falls apart.
Frequently asked
Why is my price lower than the last round's valuation?
Because you are usually selling common stock without the protections attached to the preferred shares that set the round price, often in small size, to a buyer who needs a return for taking an illiquid position.
Do I need the company's permission to sell?
Almost always. Transfer restrictions and rights of first refusal are standard, and the company's cooperation is required to record the transfer regardless of what you and a buyer agree.
See every reason a secondary sale happens, or go back tohow a deal actually works step by step.