Two companies last week offered fresh proof that it’s never too early for an emerging sector to begin consolidating.
As part of the acquisition,
The terms of the deal were not disclosed, although SecondMarket CEO Barry Silbert says that it was a stock transaction, and the total sum represented less than 5% of SecondMarket’s equity.
The deal brings together two young organizations that have applied distinct approaches to the task of linking buyers and sellers of shares in private companies. SecondMarket’s private company program, which launched earlier this year, aims to sign up companies to post shares and connect with investors through its website.
The company, launched in 2004, has been best known as a marketplace for illiquid assets. SecondMarket recently told Reuters that it has facilitated more than $1 billion in investor transactions in 2009, and now has more than $200 million worth of private company stock available for sale.
InsideVenture has taken a more in-person approach to deal-making, as it has organized meetings and conferences that bring together pre-IPO companies with buy-and-hold oriented institutional investors.
More than 140 companies were nominated for InsideVenture’s inaugural conference in late March in Santa Barbara, Calif. The InsideVenture board—which consists of members from NEA, SVB, DCM,
SecondMarket had several motives in acquiring InsideVenture, Silbert says.
One particular draw was the network that the Menlo Park, Calif.-based company has built up over the past year, which includes institutional investors, investment banks, venture capitalists and private company executives.
Silbert says the company’s West Coast location was also appealing. SecondMarket had been looking to rent offices in the San Francisco Bay Area.
Additionally, Silbert says, the InsideVenture acquisition should help SecondMarket develop a market for primary investments in private companies.
InsideVenture founder and CEO Mona DeFrawi says that she will stay on board in the interim to support SecondMarket during the transition.
In 2008, DeFrawi moved from Baltimore to the San Francisco Bay Area to launch InsideVenture to resolve what she saw as a market disruption caused by too few long-term investors securing large allocations for pre-IPO companies.
“Lately, we’ve seen a few good companies have successful IPOs, but the market won’t come back on its own,” she says. “The lack of IPOs and soaring unemployment are at the heart of the economic crisis. If we can stimulate the IPO market and stimulate jobs, the economy will grow.”
She said that part of the draw of moving to Silicon Valley to launch InsideVenture was the weather, and she says she intends to stay in the area, possibly as a consultant to companies. She also says that she has been approached by some clients of InsideVenture who have asked for help.
SecondMarket and InsideVenture are two of at least four startups recently aimed at facilitating private share sales to accredited individuals and institutional investors.
SharesPost, which launched its website in June, operates what CEO Greg Brogger calls an eBay for private company shares. Sellers and accredited buyers of private company stock list bid prices on the SharesPost website and consummate transactions for a fee. The site maintains bulletin boards for roughly 200 late stage private companies, including such venture-backed companies as eHarmony, Facebook, Linden Lab, LinkedIn, Slide, SolarCity, SugarCRM, Tesla Motors, Twitter and XCX.
Meanwhile, Redwood City, Calif.-based XChange plans to launch an auction platform later this year for private shares. Its business model includes a trading platform of primary and secondary sales of private securities and a closed private auction tool for private share sales.
Alastair Goldfisher contributed to this article.
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