Fred Wilson has an interesting post up on the soon-to-arrive market for selling non-public company stock. He’s written about this previously; overall it is a very interesting idea. Fred has some interesting data on the secondary market for Facebook stock (which is still private)
VCs need some type of exit to invest. Entrepreneurs need VCs for funding. No exits ends up meaning no ecosystem. Great quote:
Entrepreneurs won’t start companies and investors won’t invest in them if there is no path to liquidity on the company stock. A secondary market for private company stock can fill the gap that the lack of an I.P.O. market has created.
This does bring to the fore a number of issues around retention and keeping the early-in employees motivated (in my experience, the early-in employees are highly motivated people that are “smart and gets things done”). It’ll be interesting to see how it all plays out.