Investors will receive any proceeds on their investments only if there is either a “liquidity event,*” other distribution (e.g. dividends) or they are able to sell their securities in a secondary transaction. Investor suitability is therefore an important consideration before investing in early-stage company private placement opportunities. It is one reason why iSelect offers the iSelect Fund through financial advisors. In addition to being an accredited investor and being able to bear the loss of principal, investors must expect long holding periods and illiquidity. On average, venture capital and professional angel investments result in a traditional liquidity event, such as an IPO, only 10% of the time. Due to SEC regulations, pre-IPO investors must hold privately purchased shares for a minimum of six months and may be subject to additional lockup provisions, such as company rights of refusals. In addition, there is typically thin volume in secondary transactions due to low demand, few owners, and few market makers for small company securities (see, HOW DOES AN INVESTOR PROFIT FROM AN INVESTMENT IN THE ISELECT FUND?)
*An event that allows initial investors in a company to cash out some or all of their ownership shares . . . The most common liquidity events are initial public offerings (IPOs) and direct acquisitions by other corporations or private equity firms.
http://www.investopedia.com/terms/l/liquidity_event.asp