News today of Tim Draper is funding a private market exchange that will allow startups and investors to sell shares in pre-public companies. There are caveats to what companies can list (e.g. they have to have yearly revenue of $20m) but this is a welcome addition to the morbid exit side.
This and other similar secondary markets are a welcome addition to business world. These markets don't address a more fundamental problem that many startups need funding but the exit reliant VC model doesn't work for them.
There are many (if not most startups) which are never going to be able to exit at a multiple that is effective for VCs. However, they are otherwise very viable companies that will generate healthy revenues and have fat margins. Providing startup capital to these companies is a problem that needs to be solved. This will then allow VCs to focus on funding companies that can exit and benefit from the VC model.
In a Let a 1000 Flowers Bloom, I've proposed income-contingent loans but that is only the start. To effectively fund these companies what is needed is a model where the investor(s) provide the capital and receive warrants or preferred equity that after 3 years requires a dividend to be paid for 5 years before converting to ordinary equity.
Later on in the life of the business the prublic model may become worthwhile in allowing the initial investor to sell off their share and allow others (founders and employees) to cash in some of their shares as well.
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