Investing in private companies is notoriously risky. Most start-ups fail, and those that succeed can take a decade or longer to provide returns to shareholders.
During a stock market rout, like the one experienced over the past two weeks, that risk is felt more acutely as investors aim to make sure they have ready access to cash.
Starting Thursday, investors in companies like Greensbury Market, an organic food market in New York, Flipdaddy's, a burger and beer joint in Kentucky, and Le Grand Courtage, a sparkling wine maker, will have a new way to get liquidity.
That's because CircleUp, an online marketplace that connects emerging consumer brands with investors, has just introduced a secondary market that enables shareholders to sell their stakes twice a year.
While no replacement for a real-time stock market, the new offering at least opens the asset class to a segment of investors previously relegated to the sidelines because of the extended period of illiquidity.
Ryan Caldbeck, CircleUp's co-founder and CEO, said companies on the site have been asking for the service in order to appeal to a wider set of investors.
"Helping to shorten the liquidity period or giving certainty over the exits is something that both sides are particularly excited about," Caldbeck said. Investors "get a lot more excited to do that when they know a secondary market is up and running."