While investors wait and see if the IPO market has turned a corner at last, some are turning to new exchanges, such as SecondMarket, that allow buyers and sellers to trade stock in privately held companies, including hot venture-backed startups such as Facebook Inc.
In this episode of The Deal's Behind the Money online video show, Barry Silbert, the CEO of SecondMarket, talks about how his company helps venture capitalists, early employees and other holders of private company stock achieve pre-IPO liquidity for their investments.
No venture-backed companies went public in the fourth quarter of last year or the first quarter of this one. A few have gone public in the second quarter, with another, LogMeIn Inc. expected to debut this week. Without a robust IPO market, VCs must hold onto investments longer than desired; the National Venture Capital Association says that the median span from a company's founding to its IPO was 9.6 years in 2008. By contrast, in the dot-com days of 1998, it was 4.5 years.
In April, the NVCA outlined a four-point plan to jump-start the exit market. One of the points involved endorsing the concept behind SecondMarket and others like it, including Inside Venture, Nasdaq's (NASDAQ:NDAQ) Portal Alliance, and Xchange. (Subscribers to The Deal Pipeline may read more about the NVCA plan here.) Since then, another private company exchange, SharesPost, has launched, with backing from incubator BrightHouse Inc.
SecondMarket raised $350,000 from angel investors in January 2005 and $3.8 million from FirstMark Capital in August 2007.
Before founding SecondMarket in 2004, Silbert was an investment banker at Houlihan Lokey Howard & Zukin, where he focused on financial restructurings, mergers and acquisitions, and corporate financing transactions. Silbert also worked previously at Bear Stearns & Co., Smith Barney and Rydex Funds.
Watch the video below or download it on iTunes. - Mary Kathleen Flynn
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