Something remarkable is happening in public markets. SpaceX has listed with the largest IPO in history, priced at $1.77 trillion. Anthropic and OpenAI have both filed and look set to follow. On the venture data, from the NVCA-PitchBook Venture Monitor, the three of them together are projected to top four trillion dollars. That’s more than every US venture-backed tech company that exited in the previous twenty-five years combined. That is not a typo. One wave, larger than a quarter-century of the ones before it.

For the early investors, those who backed these companies at seed or Series A years ago, this is the moment the paper becomes real. Back then, they were expensive bets rather than sure things. Now, those enormous sums are about to move from locked-up private holdings into actual bank accounts. The rain, after a long time gathering, is about to fall.

I want to use this moment to talk about something more durable than any one wave: how money moves through markets, and what an angel investor should do about it. Because a liquidity event of this size does something to the whole system, and to see what’s happening, you need a way of thinking about flows.

The river

I learned to think about this at BT in the asset allocation group during the late 1980s and into the 1990s. The job was to call which way the Australian equity market would go, and one of the main inputs was supply and demand. Money flowing in, shares being issued out, buyers against sellers. More buyers than sellers and the market rises; more sellers than buyers and it falls. Simple to state yet hard to do. The data in those days was poor, and the thing you most wanted to know – how much capital was moving from one asset class into another – was the hardest thing to measure.

I worked by mental model, and the one I settled on was a river system. Picture a big catchment. At the top, rainfall events like a cyclone or a heavy snow season dump water in. Throughout the system are dams and pipes that store it, hold it back, and recycle it around. You stand somewhere in the middle with a measuring point, trying to gauge the flow. You cannot measure it exactly because there is too much you cannot see. But you can read the changes. A big snow season, and you know a lot of water is coming. A stable year, and the flow runs steady and reliable. Whatever happens upstream, one way or another the water finds its way past your measuring point. It is always going somewhere.

Every so often a change comes through the system that you can watch as it reprices the market. I had a front-row seat to one in the late 1980s, when franking credits were introduced. Companies that could pay franked dividends were suddenly worth more to domestic holders than companies that could not. The re-rating was not the whole market lifting evenly; it was franked stocks moving up against unfranked ones, a spread opening between them of something like 20%. I say “suddenly”, but it did not happen overnight. It took a while for the flow to work through and for prices to find their new relative levels. And yet it still came through, the way water always does. That is the pattern worth carrying: a big change does not move everything at once or by the same amount. It reprices things against each other, and the market takes its time getting there.

Exits are the rainfall

Here is how the river feeds early-stage investing. Exits are the rainfall. When a company goes public or gets acquired, it creates wealth for founders, for staff, and for early investors. A portion of that wealth finds its way back to the top of the system, into the next generation of startups, as angel money. The pipes that carry it are slow and they wind around, but they run. It is why you hear about house prices rising near a company’s headquarters after a big IPO: the newly wealthy spend and reinvest close to home, and you can watch the water reach the valley floor.

This is what makes the current wave matter to an angel who will never buy a share of SpaceX. The wave is more than a payday for its own investors. It is rainfall over the whole catchment. Some of that money will come downstream, months and years from now, and fall as seed cheques into companies that do not exist yet.

Right now, it matters even more because the catchment has been in drought. For years, the best companies have stayed private longer, raising round after round in private markets, reaching valuations that once would have required a listing. That sounds like abundance, and at the top of the system it is. But it is a drought at the bottom, because the water is being held behind an enormous dam. A company that stays private to fifty billion is a company whose early liquidity is not flowing back down to seed. The great IPO wave is that dam, finally beginning to release.

When the river runs dry

Now the harder half of the picture. Because rivers may flood. And they can also run dry.

Angel capital is procyclical, and it is late. It shows up once wealth has already been created, which means it is strongest near the top of a cycle and weakest near the bottom; exactly the opposite of when it is most useful. It also retreats fast. When public markets soften, angel money pulls back quickly. It is discretionary and it is nervous, and the people writing the cheques are watching their listed portfolios shrink at the same time.

At the extreme, the small end of the capital markets closes. Not the whole market, just the small end. Large, established companies can still raise in a downturn, because frightened capital flees to safety and safety means size. It is the small-cap listed companies and the early-stage private ones that get shut out, precisely because they are the risk the money is running from. It becomes nearly impossible for a small company to raise at all, at any price, while the big end of town carries on. The drought hits the headwaters first.

I know how completely that end can shut because I was trying to raise into one. In the dot-com bust I was at Dark Blue Sea, and raising capital was brutally hard. In part, because the normal channels were simply gone. In the end we got there sideways, reversing into a listed dot-com casualty that had failed as a business but still had some cash on its balance sheet and a listing attached. That is what raising looked like in that drought. There was no bookbuild with investors queuing up. It was more like backing into the wreckage of a company the bust had already killed because it was where the water had pooled.

And here is the thing I took from the other side of it. That same drought was one of the best times in my life to invest in early-stage companies. The riverbed was dry and everyone else had gone home. The deals that could be done were being done with a quality of founder and at prices that looked extraordinary a few years later. It’s a harsh reminder of the two sides to a closed market: miserable if you need capital, wonderful if you have it. When companies are starved for money, anyone still willing to write a cheque has enormous leverage on price and terms. The investor’s feast is the founder’s famine, and I saw both ends of it in the same bust. I say that as an observation about how the cycle has behaved in my experience, shaping how I think, and showing the pattern rather than a signal at any particular moment.

This is worth sitting with, because it inverts the instinct. Angel investing is risky, and angels learn to accept risk; it is the job. But market weakness is not the biggest risk we take, and it helps to be precise about how market risk reaches an angel. It does not hit your position directly, the way a falling share price hits a listed holding. It reaches you through funding, when the company next needs capital, the market has shut, and you’re facing the real danger that it cannot raise. That is the real transmission mechanism: market risk, for an angel, is funding risk.

Funding risk has a useful property. It arrives later. You invest now, but the company does not need its next round for a year or two, and by then two things have often happened. The cycle has frequently turned, so the window that was closed at entry has reopened. And if the company has used its limited capital to hit real milestones, it has de-risked itself enough to raise even in a soft market, because milestones are what funding responds to. The market risk that looks so frightening the day you write the cheque is usually moderated, by time and by the company’s own execution, before it ever comes due. This is not always true, and a company that misses its milestones in a market that stays shut is in genuine trouble and facing a real way to lose. But the frightening thing at entry is rarely the thing that gets you.

Which leaves the risks that do. The biggest ones are inside each company. Look for the team that fractures, the product that never lands, the market that was not really there. Those are what kill you, in any weather. Frightening as it feels, a soft market is more often an opportunity than a risk because it clears the field and resets the price. The angel who can stay in when the river is dry is buying from a position of strength, taking a funding risk that will probably look smaller by the time it matters.

The other discipline: taking the water when it comes

If buying into weakness is one half of the countercyclical temperament, the other half is harder, and almost nobody talks about it. It has to do with selling and taking liquidity when it is offered.

First, let’s clarify, because most angel liquidity is not a decision at all. The usual way an angel gets liquid is an acquisition. The company is bought, and the drag-along and tag-along terms in the shareholders’ agreement carry your whole position out automatically, on the terms of the deal. You do not choose because the transaction happens to you. That is the common case, and it asks nothing of you but patience.

The discipline I talk of here is for the rarer case, when you are indeed offered a choice to take some liquidity, a secondary sale, a chance to sell part of your position in a growth round while keeping the rest. And it is worth being honest that those windows are rare and mostly outside your control. Most positions never offer one. When a window does open, it is because circumstances conspired to make it, be they a lead investor willing to buy some secondary, a round structured to let early holders out, or a company doing well enough that new money wants in badly enough to allow it. It all points to the cruel fact that the choice arrives on your winners. Nobody offers to buy you out of a company that is struggling. Every discretionary liquidity decision you face is, by construction, a decision about a company that is working. Often, it is also the one you are least inclined to sell.

Once again, I have been in that exact same spot. I was an early investor in Arkose Labs, a fraud-prevention company. In 2021, SoftBank’s Vision Fund led its Series C, at a valuation that had roughly tripled in not much more than a year, and the round gave early investors a chance to take some liquidity. I took some. And I felt a bit stupid doing it.

Of course I did. The market was as hot as I had ever seen it, SoftBank was pouring money in, the valuation was flying, and there I was selling part of a position in a company that was plainly working. Selling a winner into a market that hot always feels stupid. It feels like you are the one who does not get it, leaving money on the table while everyone around you gets richer. That feeling is precisely why it is hard, and it is not a reason to ignore the window. It is worth weighing seriously each time, because the money you leave on the table is the price of banking a certain gain. And on a winner, when most of your portfolio has failed, making a realised gain you can actually spend is worth a great deal against a paper one you are still admiring when the tide goes out. This does not mean sell every time. It depends on the company, the price, and where you think the cycle is. But when the water comes, and it may not, do not wave it away just because selling a winner feels wrong.

Easy for an angel and hard for a fund

And now for the good news that should make an angel feel fortunate. That decision between taking some liquidity or letting it ride is genuinely hard for a venture fund and can be less so for angels. All for reasons that have nothing to do with whether it is the right call for the investment.

A partial sale can crystallise carry, the share of profits the fund’s managers are paid, so there is a pull toward selling to bank it, especially when the fund needs to show its own investors some cash back before raising the next one. But there is an opposite pull, just as strong. A fund lives or dies on its one or two biggest winners, and if this is the position that could return the whole fund, selling any of it caps the upside on the very asset the fund’s performance depends on. So, the pressure is to hold and keep rolling the die. Meanwhile the mandate from the fund’s own investors is often ambiguous about which of those the managers should be doing. And because any single company is a small part of a big fund, either choice can be rationalised after the fact. None of that is about the company. It is about carry, and fund returns, and optics, and the fund manager has to weigh all of it at once.

The angel has none of that. No carry to time, no fund-return maths, no mandate to interpret, no next fund to raise. The angel’s question is clean: is banking some certainty worth the money left on the table, for me, on this holding? The only thing standing in the way is their own greed. That is a hard enough opponent, but it is one opponent, not four, and it is the same one every time, so you can learn its moves. An angel’s life, in this one respect at least, is much easier. You only have to beat yourself.

Reading your own flow

The discipline runs both ways, and both halves mean acting against the emotion the market is generating. When the river is dry and everyone has fled and it feels reckless to be writing cheques, that is often when you should. When a rare chance to take liquidity opens on a company that is flying and it feels idiotic to sell, that is often when you should weigh it hardest. Buy the weakness, take the water when it comes, and expect both to feel wrong at the time. Feeling wrong is not a signal that you are making a mistake. Frequently it is a signal that you are early, which is where the returns live.

Time (and effort) is lost trying to predict the cycle. It’s not possible, nor is it even necessary. Instead, look to the flow, noticing whether the river is rising or falling, whether the rain is coming or the bed is drying out. Develop the temperament to act against the crowd at the measuring point. The crowd is procyclical. The returns are not.

We have seen our own version of this in Australia. Atlassian’s listing and Canva’s partial liquidity events put real wealth into local hands, and a good deal of it has come back downstream as angel capital, seeding the companies and the investors of the next cycle. The catchment here is smaller, but the river behaves the same way. Watch the rainfall, watch the drought, and remember that the best fishing is usually when the bed looks driest.

Richard Moore is co-founder of MooCoo Ventures, an angel syndicate that co-invests alongside Brisbane Angels, one of Australia’s most active angel groups. He has made over ninety personal angel investments since 2013.

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