Deal Radar 2009: SharesPost

It’s a problem that is not going to go away any time soon: How to make private equity liquid? SharesPost, a marketplace that connects buyers and sellers of private equity and automates the sale of private company stock, is one company offering a solution. Currently operating in public beta, the company was founded by Greg Brogger, who has spent his career in the private equity world. The Santa Monica, California-based company was founded as a means to address the economic crisis, which has made initial public offerings and mergers and acquisitions rare.

The company, as TechCrunch points out, has valuable and interesting data with insight into the realistic value of many private tech companies. This information, which can be used by almost any investor, is open to nonpaying users as well. SharesPost offers independent third-party research from Next Up! Research and VC Experts, escrow services from U.S. Bank and electronic signatures from EchoSign. The company, however, does not want to be classified as a brokerage firm and charges buyers and sellers $34 in membership fees instead.

The company was launched with a focus on founders, executive teams and angel investors as Brogger feels that these users are the ones who are in urgent need of liquidity, and are least served by other solutions in the market. SharesPost feels that it got early traction by offering a low-cost platform that could work with smaller transactions that brokers didn’t find worth their time. It gained momentum by centralizing and organizing hard-to-find data on private companies and aggregating analyses on and opinions of that data. This approach, SharesPost believes, has helped it attract users who wish to know what their stock is actually worth.

According to Compete, the site got 1,680 unique visitors and 4,591 visits in May. Since its launch on June 16, 2009, SharesPost has gained more than 4,000 registered users. The number of unique visitors increased to more than 27,000 in June. SharesPost says that one out of every four visitor registers on the site and claims to have become the largest online platform focused on connecting buyers and sellers of private company shares. The SharesPost community has an increasing number of posts to buy and sell shares of private companies such as LinkedIn, Facebook, SolarCity, and Tesla Motors.

Although each company has a different focus, SharesPost is not without competition: InsideVenture, with a “hybrid public-private offering” model that still uses investment bankers as underwriters to make a market, launched on June 1. Tim Draper of venture capital firm Draper Fisher Jurvetson, soft-launched XChange early last month. XChange’s services include a platform for new issues and aftermarket sales, a private auction for defining valuations and allocating shares, and, like SharesPost, a platform matching buyers and sellers.

SharesPost is planning to roll out new features to its core solution set and expand beyond its initial focus on venture-backed companies in the coming months. The company, which has been funded by angel investors so far, is also beginning its Series A financing efforts.

Suggested Reading:

*Financial Crisis & Short-Selling
*The Future Of Venture Capital: Trinity Ventures Partner Gus Tai
*Saints Capital: Offering Secondary Market Liquidity

This segment is a part in the series : Deal Radar 2009