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In the days when a two-guys-in-a-garage startup could morph into a massive public offering with relative ease, SharesPost might have had a hard time making its case. The startup, which launched an experimental marketplace last month for buying and selling private equity, aims to step in and help entrepreneurs, investors and employees turn their equity into cash at a time when IPOs are few and far between. And according to SharesPost CEO Greg Brogger, few sectors need this “third exit” (an alternative to acquisition or public offering) more than cleantech.
Brogger told us in an interview this afternoon that Facebook’s “bulletin board” on the SharesPost site — which is not controlled or managed in any way by Facebook but rather provides a platform for SharesPost subscribers to post and bid on equity offerings — has the most activity out of some 175 startups now listed on the site (up from about 120 last month). But SharesPost kicked things off last month with publication of a report that gave electric car startup Tesla Motors a valuation of $1 billion (Tesla saw 2,500 of its shares trade for $10 apiece in SharesPost’s first transaction), and this afternoon the site is publishing a new report on solar installer SolarCity that puts the startup’s valuation at $300 million to $325 million.
Why the cleantech love? Brogger said the amount of money that venture capital firms like Kleiner Perkins have poured into cleantech startups, and the length of time it takes many of them to mature, means there is more pent up demand for valuations and a private equity marketplace in this space than in a sector like Web 2.0.
The idea is that cleantech companies building capital-intensive products like cars and solar panels need to raise more funds, more quickly than Web 2.0 counterparts. “Green companies do quite well,” on SharesPost, Brogger said. “They tend to be larger and well financed,” which means the sector has plenty of later-stage startups meeting SharesPost’s criteria for listing on the site, which include having a minimum $100 million market cap. In addition, the minimum transaction is $25,000. Increasingly, Brogger said SharesPost — which attracted more than 4,000 subscribers in its first two weeks — is looking to tighten the requirements, looking for quality standards like independent directors.
In cleantech, Brogger said, some of the biggest, most influential players exist in “a black hole,” lacking the scrutiny and analyst coverage that they would receive if the IPO market were warmer and they dared to go public. “There’s no point in producing research if there’s nothing you can do with it,” Brogger said.
So while SharesPost’s revenue comes from subscriptions that let users buy, sell and comment on the site bulletin boards, Brogger sees SharesPost as essentially a distribution platform for this kind of research (supplied by small, independent analyst firms) on private companies. Brogger said transactions tend to follow publication of these research reports, which you can download for free if you register with your name and email — so we’ll be interested to see what happens with SolarCity.
Graphic from Next Up Research report on SolarCity, courtesy of SharesPost