More startups let employees sell shares on SecondMarket amid IPO uncertainty

Ki Mae Heussner — Fri, 09 Nov 2012 18:38:20 +0000

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.

Image by Denis Vrublevski via Shutterstock.

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What will be the next tech IPO?

Ki Mae Heussner — Fri, 15 Jun 2012 21:22:13 +0000

It’s the question on everyone’s lips, particularly in the fallout of Facebook’s anticlimactic public debut. But, not surprisingly, when Bloomberg TV’s Deirdre Bolton asked some of the top venture capitalists which tech companies might go public next, everyone steered clear of naming names.

It will be “something that looks more like Salesforce than Facebook,” Fred Wilson, managing partner of Union Square Ventures, said Friday at the F.ounders conference at the Nasdaq headquarters New York. He added that investors will likely feel more comfortable with an enterprise-like business that has a more sustainable and predictable business.

Eric Hippeau with Lerer Ventures said he thinks there are a few companies big enough to go public, particularly in the media and e-commerce areas. And Google Venture’s Rich Miner said potential IPO candidates are those with solid business models, good growth and revenue. But even companies that might be a little less predictable but are in highly disruptive spaces (such as mobile) are possibilities, Miner said.

Asked about how secondary markets (that let pre-IPO companies sell stock) change the game for investors, Goldman Sachs’ Anthony Soto said they provide liquidity that wouldn’t otherwise exist. But he warned that secondary trades don’t accurately reflect the value the company would get in the public markets because there’s limited supply and demand, and those markets exist outside the environment of SEC regulation.

At a F.ounders event Thursday night, Soto also commented on the likelihood of more tech IPOs this year, saying that he doesn’t expect to see another Internet IPO until after Labor Day.

To the room full of tech startup founders, Wilson said they should think about whether they want to run their companies for 15 to 20 years or exit and move on to something new. “If you want to make a company your life’s work, then be a public company,” he said, “If you’re looking for exits… I don’t think the public markets are the way to go.”

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More startups let employees sell shares on SecondMarket amid IPO uncertainty

What will be the next tech IPO?