San Francisco, CA – Avlok Kohli, CEO of AngelList, has publicly stated the company's intention to actively combat what he terms the "predatory secondary market for startup shares." In a recent social media post, Kohli directly appealed to founders with open funding rounds and strong lead investors, inviting collaboration to address these issues. His tweet stated, > "If you're a founder with an open round and strong lead investor, please get in touch with me. AngelList is interested in knocking out the predatory secondary market for startup shares and we have several projects underway."
AngelList, a prominent platform in the venture capital ecosystem, has evolved significantly under Kohli's leadership since 2019, becoming a critical infrastructure provider for private markets. The company facilitates connections between startups and investors, offering services for fundraising, fund administration, and special purpose vehicles (SPVs). This deep involvement positions AngelList uniquely to observe and influence practices within the private investment landscape.
The secondary market for private company shares allows early investors, founders, and employees to sell their equity before a traditional liquidity event like an Initial Public Offering (IPO) or acquisition. While providing crucial liquidity, this market often faces challenges such as illiquidity, opaque valuations, and a lack of standardized processes, which can lead to unfavorable terms for sellers. These conditions can be exploited, creating what Kohli refers to as "predatory" environments.
AngelList has previously engaged in this space, offering a "Transfers" service to facilitate secondary stock sales for more mature startups, simplifying the cap table by packaging new shareholders into a single entity. However, Kohli's recent announcement signals a more proactive stance beyond mere facilitation, indicating a strategic push to actively counter detrimental practices. The "several projects underway" likely aim to introduce greater transparency, fairer terms, and more efficient mechanisms for secondary transactions.
This initiative aligns with AngelList's broader mission to democratize and streamline private market investing. By focusing on standardizing processes and ensuring equitable access and terms for all stakeholders, AngelList seeks to enhance trust and efficiency in the secondary market. Such efforts could significantly benefit founders and early employees, allowing them to realize value from their equity in a more secure and transparent manner.