Secondary Sales Fund Angels

Kevin Rose describes how early-stage founders can generate initial angel investing capital through secondary stock sales to their investors, which he used to fund early investments in companies like Twitter and Facebook.

Key Points:

• Secondary Stock Sales Process:

  • Investors approach founders during financing rounds
  • Offer to buy some of founder's personal stock to "take pressure off"
  • Allows founders to get liquidity without waiting for exit

• Investment Strategy with Proceeds:

  • Use funds for small seed checks ($25k range)
  • Target early-stage companies
  • Example investments:
    • Twitter seed round ($25k)
    • Facebook (slightly later stage)

• Benefits:

  • Gives founders early liquidity
  • Enables angel investing without personal wealth
  • Small checks can yield significant returns when companies become multi-billion dollar businesses

• Real Example Results:

  • Bought Twitter shares from early engineer Blake
  • Got in at low valuation before major price increase
  • Led to significant returns when Twitter grew to multi-billion valuation

This approach allows founders to participate in angel investing before a company exit by working with their investors to get early liquidity through secondary sales.