I bought a secondary stake and found out the hard way what rights didn’t come with it
I owned the company. I just didn’t own the right to buy more of it when the best round came along.
Individual buyer, third secondary purchase
Illustrative composite. A representative scenario built from how angel secondaries commonly play out — realistic numbers, written in the first person, not the record of a specific named person or company.
Deal snapshot
- Side
- Buying
- Sector
- Climate tech
- Stage at purchase
- Series C
- Amount deployed
- $50,000
- Bought at
- 10% below Series C
- Right transferred
- None — no pro rata
- What I missed
- An oversubscribed Series D
A clean-looking deal
I bought directly from a departing early employee — shares, not an SPV, a straightforward transfer at a 10% discount to the last round. It felt like the good version of a secondary: no platform fees, no black box, a real conversation with the seller.
The rights I didn't think to ask about
Pro rata rights — the ability to invest more in the next round to hold your ownership percentage steady — belonged to the seller's original investment terms. They're personal to the original investor by default and don't automatically travel with the shares unless the transfer documents specifically assign them, which mine didn't.
When the company raised an oversubscribed Series D eighteen months later, existing pro rata holders got a guaranteed allocation at the round price. I got an email politely explaining I wasn't eligible, followed by an offer to be waitlisted if anyone dropped out. Nobody dropped out.
What I ask for now
On every secondary purchase since, I ask explicitly whether pro rata rights are assignable and get it addressed in the transfer documents before I wire anything — even if the answer is usually still no. At least now it's a known trade-off, not a surprise eighteen months later.
What to take from this
- Ask whether pro rata rights are assignable before buying secondary shares directly.
- A direct peer-to-peer purchase avoids platform fees but requires you to negotiate rights yourself.
- Missing a hot follow-on round is a real, quantifiable cost of buying secondary rather than primary.
Every angel who has held a position long enough eventually faces a version of this decision. For the mechanics behind stories like this one, see the guide to how secondaries work.