Over the past few years on SecondMarket, the New York-based platform for trading shares in privately-held companies, the majority of sellers have been former employees of startups. But in the last couple of quarters, as the IPO market cooled in the wake of Facebook’s disappointing debut and the poor performance of other recently-public tech companies, SecondMarket said current employees have become the new dominant class of sellers.
As more startups put their IPO plans on ice and eye a longer path to the public markets, they’re using SecondMarket liquidity programs, which let employees cash out pre-IPO, as a way to rally the troops, the company said.
“Companies don’t want to go public,” said Aishwarya Iyer, public affairs manager for SecondMarket. “[They] realize that their employees will need liquidity at some point, and are working with us to create employee liquidity programs as a morale-booster.”
According to SecondMarket’s third quarter report released Friday, 75.5 percent of the sellers were current employees, which is up from about 60 percent last quarter and just 17 percent in the third quarter of last year. Former employees comprised just 18 percent of the sellers in the third quarter of this year, down from 65 percent in the same quarter last year. Traditionally, many private companies have banned current employees from selling shares or limited the amount they can sell.
Workday’s big IPO last month could give startups more hope about a nearer-term public debut, but it will be interesting to see if companies continue to use liquidity programs as a way to keep up internal morale.
In the third quarter, SecondMarket said that the companies whose shares were traded on its platform had a median market cap of $538 million and that the median funding amount raised was $146 million. It also said that while consumer web and social media companies have dominated in other quarters, the consumer electronics industry received the most transactions this quarter, followed by e-commerce and financial services.
In its report, the company also listed a few of the startups that attracted the most attention in the third quarter.
Cloud networking provider Meraki led the list of “rising stars” (with a 309 percent increase in people who “watched” it online), followed by Codecademy, Kiip, Good Technology and Sonos. Online education startup Coursera took the top spot on the list of “newbies,” followed by Addepar, RocketFuel, Fancy and Coupa.
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