[wyman]

Where are all these secondary market companies "arbing" it out on employee stock option liquidity? The market should be HUGE, both for locked-in employees, and for buyers who want a small discount on hot startups.

This would totally solve the 90-day exercise period problem for the employees, without requiring company goodwill.

Some companies like ESOFund, 137 Ventures, EquityZen can do deals without company involvement, with a non-recourse loan with limited upside/downside, or a forward contract with cash delivered today, and the certificate held as collateral until IPO, when it is transferred.

There are increasingly share restrictions (which some consider unenforceable) on sales/transfers, loans, etc. First-hand knowledge online is scarce and lawyers give unclear answers due to the novelty of these deals. Can the company find out? Intervene? Sue? Are they likely to? Do we need a public case and TechCrunch headline in order to find out what the outcome is? How different is self-financing vs. a rich relative vs. angel vs. a marketplace investor?

Ask HN thread: https://news.ycombinator.com/item?id=12034716

Edit: It seems like I misunderstood, and the investors are investing in the company itself, not buying employee shares on the secondary market. The major point still stands though.

[rbcgerard]

Usually the major problem with buying employee shares on the secondary market is information asymmetry - the company is not going to provide the buyer with any information, therefore unless the buyer is intimately familiar with the inner workings of the company (I.e. An investor, or incredibly well plugged in) they really have no idea how the company is doing (despite being a "hot" company) which in turn makes it incredibly difficult to come up with market clearing prices

[wyman]

That's definitely true - so basically, the buyer is more averse to buying especially considering they are essentially investing in the dark, going off of public news or hearsay? For some of the most-fundraised private companies e.g. Uber, Airbnb, Stripe etc. I figure many would be satisfied with the last private round valuation or a small discount, and the loss/market inefficiency here (5-10%) would still allow most deals to work. However, as a seller, your pitch, especially for less-well-known companies, would be much more difficult.