Parts of the answer are that (a) there are enormous regulatory requirements relating to secondary markets, and (b) there are no analysts tracking private company stocks.
But by far the biggest issue is that the very essence of public markets (and what makes them “public”) is that the SEC mandates an enormous amount of transparency, including complete quarterly financial statements, complete publication of the company’s cap table including all significant shareholders, and so forth. NONE of that is available with seed stage startups, so that even IF it were legally and economically viable to trade them, and even IF there were analysts who followed every public move the company made, there still would be no way whatsoever for anyone outside the company (or Major Investors, if they have Information Rights) to have the slightest idea as to what a realistic price should be for the stock.
In my own portfolio I have companies that are generally perceived to be extremely successful with high profile customers and lots of sales…but they just happen to have a liquidation preference ladder of $25 million! And there are others that people think are teeny little wannabes with a dozen or so employees…that have $25 million in highly profitable revenues with hockey stick growth and zero debt!
So while we may (and probably will) eventually see the emergence of a secondary market for private stock (and I’m not talking here about things like SharesPost and SecondMarket, which are essentially bulletin boards that attract people in as lead generators for registered broker/dealers), it is going to require some significant changes to the practical, legal and economic sides of seed investing.
*original post can be found on Quora @ : http://www.quora.com/David-S-Rose/answers *