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NASDAQ Acquires SecondMarket to Help Startups Sell Shares

59 points by lleims 11y ago

AndrewKemendo 11y ago
If these shares become traded to the general public, then you really have a bubble with some wide ranging impact. What is it, like the pinksheets?
chollida1 11y ago
Y Combinator is moving up the funding chain with a fund raised for follow on funding rounds Nasdaq is moving down the funding chain by acquiring a market for trading equity in pre-public companies. Hedge fund and Private equity are starting to participate more in pre-public funding rounds. Everyone is encroaching on the turf that used to belong solely to the Venture Capitalists. I'm really not sure how to read this. - is the market telling vc's they are doing a poor job? - is the market getting a bit bubblish? I think the day of vc's making 2 and 20 are coming to a close. Especially if they want to lock up your money for 7-10 years. I think the new pay paradigm for vc funds will be a flat management fee(much less than 2% per year) and stepped payouts ratio where the vc gets a gradually increasing percentage of profits up to their customary 20%. As to the private equity markets, there are already markets hosted by the public markets for trading restricted shares of public companies. Restricted shares are shares issued by a company to do secondary raises(post IPO raise), usually granted with a warrant and below the current market value that can't be traded for a set period of time, usually 3-4 months. This acquisition seems like a natural extension of those markets.
- pbreit 11y ago
  All of your examples suggest that it's the public markets that are not doing their job.
  - vonklaus 11y ago
    This is very true. While there has never been a bubble without the public markets involved, there has also never been this degree of capital deployed in private markets. I mean that as an investment, in the sense that if I lend my neighbor $5K to start up a farm or something, I have money in the "private market", but I have a firm idea of where it is and how it is being used. This has been historically how capital was in private markets, pre-tech. However, now there are large funds, and funds of funds, taking investor money and parking it into vc & pe firms, as well as companies directly. All of these companies have fees associated with deploying the capital and are competing for a finite resource, driving up the price. The public markets are extremely efficient at whatever they're for now, mainly HFA, gambling, and FOREX liquidity, and warnings that something bad has happened in the world. Or for alerting the world that the FED is making an announcement. They are not used for raising capital to fund business expansion. They are a last resort for dumping a failing company or a forced move because a company scaled out and has hit shareholder max and therefore is defacto public anyway.
    - pbreit 11y ago
      What I meant is that all the activity you reference is because of the difficulty or undesirability of IPOing.
- djyaz1200 11y ago
  All good points. Anytime you're making 40X'ish on any investments I think its reasonable to expect others to seek out your alpha from all sides.
- ChuckMcM 11y ago
  Yup, pretty much it is capital seeking alpha. Can't find it in the public equities market? Look for it in the private equities market.
- late2part 11y ago
  You should know you're not allowed to say THAT out loud: is the market getting a bit bubblish?

59 points by lleims 11y ago

If these shares become traded to the general public, then you really have a bubble with some wide ranging impact. What is it, like the pinksheets?

chollida1 11y ago

Y Combinator is moving up the funding chain with a fund raised for follow on funding rounds Nasdaq is moving down the funding chain by acquiring a market for trading equity in pre-public companies. Hedge fund and Private equity are starting to participate more in pre-public funding rounds. Everyone is encroaching on the turf that used to belong solely to the Venture Capitalists. I'm really not sure how to read this. - is the market telling vc's they are doing a poor job? - is the market getting a bit bubblish? I think the day of vc's making 2 and 20 are coming to a close. Especially if they want to lock up your money for 7-10 years. I think the new pay paradigm for vc funds will be a flat management fee(much less than 2% per year) and stepped payouts ratio where the vc gets a gradually increasing percentage of profits up to their customary 20%. As to the private equity markets, there are already markets hosted by the public markets for trading restricted shares of public companies. Restricted shares are shares issued by a company to do secondary raises(post IPO raise), usually granted with a warrant and below the current market value that can't be traded for a set period of time, usually 3-4 months. This acquisition seems like a natural extension of those markets.

pbreit 11y ago
All of your examples suggest that it's the public markets that are not doing their job.
- vonklaus 11y ago
  This is very true. While there has never been a bubble without the public markets involved, there has also never been this degree of capital deployed in private markets. I mean that as an investment, in the sense that if I lend my neighbor $5K to start up a farm or something, I have money in the "private market", but I have a firm idea of where it is and how it is being used. This has been historically how capital was in private markets, pre-tech. However, now there are large funds, and funds of funds, taking investor money and parking it into vc & pe firms, as well as companies directly. All of these companies have fees associated with deploying the capital and are competing for a finite resource, driving up the price. The public markets are extremely efficient at whatever they're for now, mainly HFA, gambling, and FOREX liquidity, and warnings that something bad has happened in the world. Or for alerting the world that the FED is making an announcement. They are not used for raising capital to fund business expansion. They are a last resort for dumping a failing company or a forced move because a company scaled out and has hit shareholder max and therefore is defacto public anyway.
  - pbreit 11y ago
    What I meant is that all the activity you reference is because of the difficulty or undesirability of IPOing.
djyaz1200 11y ago
All good points. Anytime you're making 40X'ish on any investments I think its reasonable to expect others to seek out your alpha from all sides.
ChuckMcM 11y ago
Yup, pretty much it is capital seeking alpha. Can't find it in the public equities market? Look for it in the private equities market.
late2part 11y ago
You should know you're not allowed to say THAT out loud: is the market getting a bit bubblish?