Private exchange to aid startups seeking more cash

Sep 02, 2009 By RACHEL METZ , AP Technology Writer

(AP) -- Since June, a Web site called SharesPost has been helping a small pool of qualified buyers and sellers trade shares in fast-growing startups that have not yet gone public. Now, the private stock exchange is hoping those same startups will use its site to search for funding.

Next week, SharesPost plans to add a Private Placement Marketplace that will let larger startups - with a market capitalization of at least $100 million - connect with investors directly. Previously, the site was meant for shareholders - such as employees - to sell shares among themselves and other investors.

SharesPost founder Greg Brogger said there are currently few ways for privately held startups of such size to raise capital. As they burn money on operations, he said, venture capitalists - often a good source for startup funding - aren't so willing to write $50 million or $100 million checks.

Raising money through an isn't a good option these days, either, given the poor economy and the costs and regulatory burden that come with trading publicly.

SharesPost is hoping to fill the gap.

Brogger said investment banks that help startups obtain funding will be able to post funding requests on a special bulletin board for so-called private placements - in which qualified private parties invest in a company in exchange for shares. Qualified potential investors, such as hedge funds, can view the listings and decide if they want to invest.

SharesPost also wants to let companies get more involved on the site overall, so starting next week startups will be allowed to join and set restrictions over who buys or sells shares there. A company could, for example, restrict SharesPost trades to people who are already holders of its stock.

This would be in addition to any other restrictions already in place. One common rule imposes the "right of first refusal," which generally means employees who find buyers for their shares have to let the company decide if it wants to buy back the stock instead, for the same price.

If SharesPost's overall activity thus far is any indication, the site may see some companies interested in logging in.

Since its launch, 25 trades have been completed through the site for shares of companies like social network Facebook, electric car startup Tesla Motors and business networking site LinkedIn. The average transaction is priced at $75,000, three times the minimum price. Brogger estimated that another 25 deals started on SharesPost but were completed off the site.

As with other private exchanges, only individual accredited investors and institutional investors - organizations like venture capital firms or pension funds that manage at least $100 million in assets - can buy and sell shares on the site.

The site currently has 7,000 registered users - more than 75 percent of whom are accredited investors, Brogger said, which means they have a net worth of at least $1 million or salary of at least $200,000 for the last two years.

©2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Explore further: China's Xiaomi raises more than $1 bn in funding

add to favorites email to friend print save as pdf

Related Stories

Facebook, Twitter and peers for sale -- privately

Jun 27, 2009

(AP) -- Scott Painter makes his living betting on startup companies, having played a role in launching 29 of them over the years. But with the bad economy choking initial public offerings and acquisitions, ...

Despite economy, new startups retain optimism

Mar 19, 2009

(AP) -- With many established businesses just trying to survive, you might not think it's a good time to start a company, let alone ask anyone for money to help get it rolling. But if a series of presentations ...

SolarWinds shares climb during first trading day

May 20, 2009

(AP) -- Shares of SolarWinds Inc. climbed Wednesday during the network management software maker's first day of trading, marking the latest flicker of life in an IPO market that has barely registered a pulse this year.

VC investments plunge 51 pct to $3.7 billion in 2Q

Jul 21, 2009

(AP) -- Venture capitalists cut their U.S. investments in half during the spring, the second-consecutive quarter to mark a more than 50 percent decline, leaving the money flowing to startups at the slowest trickle in 12 ...

Recommended for you

China's Xiaomi raises more than $1 bn in funding

21 hours ago

China's top smartphone seller Xiaomi Corp. is raising more than $1 billion in a fresh round of funding, a move which would raise its valuation above $45 billion, a report said Sunday.

Why the Sony hack isn't big news in Japan

Dec 20, 2014

Japan's biggest newspaper, Yomiuri Shimbun, featured a story about Sony Corp. on its website Friday. It wasn't about hacking. It was about the company's struggling tablet business.

Sony faces 4th ex-employee lawsuit over hack

Dec 20, 2014

A former director of technology for Sony Pictures Entertainment has sued the company over the data breach that resulted in the online posting of his private financial and personal information.

Sony tells AFP it still plans movie release

Dec 20, 2014

Sony Pictures boss Michael Lynton denied Friday the Hollywood studio has "caved" by canceling the release of "The Interview," and said it still hoped to release the controversial film.

2012 movie massacre hung over 'Interview' decision

Dec 19, 2014

When a group claiming credit for the hacking of Sony Pictures Entertainment threated violence against theaters showing "The Interview" earlier this week, the fate of the movie's big-screen life was all but ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.