A secondary market investor is someone who will buy the shares from you after you've exercised. These people may or may not exist, depending on how attractive

A secondary market investor is someone who will buy the shares from you after you've exercised. These people may or may not exist, depending on how attractive the company is. The shares you purchase from the company will likely be restricted, and you won't be able to transfer them for a year. After that year is up, you can sell it to whomever you wish. The company will have right of first refusal, but if it comes to that, you don't really care who buys the shares off of you (company or secondary market investor) because you get paid the same either way. This is technically different that what Alex is proposing, but the end result is fairly similar. He's offering to loan you money to exercise. You keep ownership of the shares, and the loan comes due if and when there is a liquid market for the shares. He's allowing you to move on from the company before any other investor is interested in the shares, but still provide upside to you if and when the shares are actually worth something. And he takes some cut because he's assuming the (very significant) risk that no other investor is ever willing to pay for the shares.