We are excited to announce our private company secondary transaction results for the first half of 2014. We had a record first half, conducting over $900 million in private company secondary transactions. This represents an increase of more than three times over the same period in 2013. As our results show, private companies have embraced regular employee liquidity as a consistent and reliable part of employee compensation. More details on our record activity are posted in the graphic. You can also see SecondMarket’s 2013 Private Company transaction activity and other past data here.

Thursday evening, Bill Siegel, interim CEO of SecondMarket’s private company/fund business, spoke with Erin Griffith of Fortune.com. The interview below was featured in an article titled: “SecondMarket pivoted after Facebook’s IPO. Now, volume is higher than ever.” It was originally posted on July 25, 2014. You can see the full article here.

How have SecondMarket’s products changed since the Facebook era?

Late 2011 was the fever pitch of pure, over-the-counter, pre-IPO private company stock trading mania, centered mostly around Facebook. We knew Facebook was going public, and that was obviously a large source of revenue. But the market was shifting, starting a year prior to that. A lot of the other private companies didn’t like the way the pre-IPO market was shaping up.

We began to formulate a product around what private companies wanted and desired. The first was a legal solution. You could structure these things as tenders keep them private. The company controls the rules, the price, who can sell and how much, not the external broker or some buyer that is scalping around for shares. Then we productized the user experience.

How has that worked for you?

We have been developing this since the private market wound down [in early 2012]. These are very private transactions. We are having, in 2014, a record year. We’ve done almost $1 billion in private company secondaries in first half of this year.

Do you agree with what we wrote on Monday, that startups are increasingly wary about letting shareholders cash out early?

I can understand why companies are really reticent, and it’s why we changed our model back in 2011. The companies were being really proactive. We heard from the companies saying, “Quite frankly, [selling shares] should be outlawed because it’s so distracting. We don’t want anything like [what happened at Facebook] to develop and we’re looking at ways to change the bylaws in our businesses so it can be explicitly outlawed.” Venture firms have said when founders are forming their companies, they’re [outlawing share sales] at that stage. That was when we realized a different solution was going to be required.

The pressure to give employees a little bit of liquidity will not go away. Fast-growing businesses are going to see the pressure increase and it’s a question of resources. The last thing you want to do when you’re the CFO is to hire three people to do stock plan administration because of all of the employees screaming for liquid equity.

The right-of-first-refusal (ROFR) requests are not going to stop as you grow and get more mature and build up a large ex-employee stockholder base. There are always going to be people looking to buy that stock and looking at those ex-employees. The easiest way is to do a broad-based tender and clean up the cap table. A lot of the tenders are set up to align incentives. For example, a current employee can only sell 10%, but ex-employees have to sell 100% or nothing.

Who are the most common buyers on SecondMarket today?

One third is just the company tendering and using their own cash to buy back shares. Two thirds are third parties. Out of those, the most common are mutual funds—75% are mutual funds, the other 25% are hybrid growth hedge funds. The mutual fund involvement is certainly notable. The sheer fact that these companies are waiting so much longer to go public and that value creation is accruing to venture investors is the main impetus for a lot of these mutual funds.

Are you doing more volume now than you were before Facebook?

This year we’ll do the same amount of private company secondary transactions that we did in the years where Facebook was at its largest. That’s notable because the size and velocity with which Facebook was trading during those years was gargantuan. We’ll do on the order of 50 to 60 transactions this year.

After Facebook, SecondMarket had layoffs and scaled back. Have you expanded back to the same size you were in those days, too?

No, we had a significant team. We’ve refined our sales and marketing model so it’s not as intensive as it was back them. That was over-the-counter, all phone-brokered at the time. We are not a phone broker anymore, we’re a product and technology company. No longer is the focus on trading, so it’s taking as little labor as possible to transact these secondaries.

You’re VC-backed as well. What’s ultimate outcome for SecondMarket?

We have a big market to get into and a few more products on the slate. It’ll be heads down for at least a couple of years.

What’s the future of secondaries?

The trend is towards repeat and recurring [tender offerings], and that is being messaged to employees at the company. People look at [equity] as a lottery ticker kind of. When you run [a tender offer] every year or twice a year, that shifts the way the employees view that stock. This is actually now compensation. It’s not just a lottery ticket. That’s really meaningful, especially for growth companies. Companies can use that as a retention tool, and it can be a meaningful part of compensation.

Believe it or not, it was ten years ago that I founded the company that would later be renamed SecondMarket. Over the past decade, SecondMarket has gained tremendous experience breaking open new markets such as private company stock, auction rate securities, bankruptcy claims, community bank stock and, most recently, bitcoin. The competencies and lessons learned opening these markets has been invaluable.

As with all startups, we have had some fantastic successes and some clear failures.  But along the way, SecondMarket successfully transitioned from a telephone-based broker of illiquid assets into a highly scalable, product-focused organization that has redefined how private companies and funds raise capital and facilitate liquidity for their stakeholders. We have product market fit, a fantastic team, a record number of private company/fund customers and are very well positioned for long term success. The future for SecondMarket has never been brighter.

While I have never been more excited about SecondMarket, I have chosen to move on from day-to-day management of the private company/fund business so that I can focus 100% of my energy on our digital currency business. My passion for bitcoin is no secret, and I feel it is the right time to make this transition. Our intention is to formally separate the two business lines at the appropriate point in time. In the meantime, I will remain Chairman and CEO of our parent holding company.

Bill Siegel, who has been instrumental in the development and refocusing of our private issuer products, has been appointed Interim CEO of that business line. Our clients are in great hands with Bill at the helm, and we are running a formal search for a permanent CEO for our private company business, in which Bill is a candidate.  

 Barry Silbert, Founder & Chairman

In late September, the SEC eliminated its longstanding ban on general solicitation. For the first time in 80 years, companies and funds (issuers) can publicly discuss plans to raise capital. While the accredited investor restrictions remain, this rule change has the potential to create a paradigm shift in the way money is raised in the US.

The intent of the JOBS Act was to enable capital to flow more freely to smaller enterprises, so while it is now legal to tell the world about a capital raise, there’s a catch. The SEC has mandated that the issuer take reasonable steps to verify that all investors they accept are actually accredited investors as defined by the SEC. This is just one of many nuances that are vital to understand before deciding to publicly discuss a capital raise. In addition to issuers, other market participants will have to adapt. Here’s a breakdown of how these participants may be impacted by general solicitation rule change:

  • Companies: Now it is legal for companies to shout from the rooftops that they are open to new investors. But just because they can, doesn’t mean they should. If a company generally solicits, investors will need to undergo additional vetting before making an investment. Companies need to consider how their potential and existing investors will react to a public solicitation.
  • Incubators/Platforms: Incubators & platforms can now cast a much wider net in order to find new investors & evangelists for companies. But the onus of making sure that investors are eligible to invest still resides with the company – so it is important to be thoughtful about which investors to accept and how to manage that process.
  • Lawyers: The most important thing is to work with a lawyer to understand the implications of generally soliciting before starting to fundraise. These rules are VERY new so it is reasonable to expect conservative advice. Hear what the lawyers are saying on this LexisNexis panel.
  • Investors: Retail accredited investors now have access previously unseen deal flow, which helps them identify more opportunities and deploy more capital. Professional investors that are accustomed to private deals may find the additional requirements for verification bothersome. Most investors are excited about the new rules and the deals that have emerged as a result of the changes.

If you want to learn more, 500 StartUps, AngelList and SecondMarket will be hosting a webinar to discuss how general solicitation can help your company. Join us on November 13. Sign up now!

If you are unable to join the webinar, but would like to learn more about how to simplify your capital raise, reach out to Sudhir Kandula at skandula@secondmarket.com.

Over the last several weeks, you may have heard that the SEC eliminated its longstanding ban on general solicitation, allowing companies and funds to publically discuss the fact that they are seeking to raise capital through a private offering to accredited investors. As companies and funds develop their general solicitation strategies,  investors may be wondering how this new rule change will impact them.

Read SecondMarket’s latest article, “Understanding General Solicitation and How it Impacts Investors” for a quick breakdown of how general solicitation may impact investors.


I’m excited about today. Over the past two years I’ve become a big believer in bitcoin, the digital currency and transaction network. Friends, colleagues - honestly, anyone who would listen - have heard me describe the potential benefits of bitcoin. It could be this generation’s store of value, or a true global currency, or a better money transfer network. Or all three.

Or perhaps not. Bitcoin faces regulatory hurdles and widespread adoption concerns that make investing in bitcoin a very risky proposition. There is a real possibility that the price of bitcoin drops to zero. It is challenging to buy, store and secure bitcoin, and many investors simply don’t want to deal with the hassle of it. Yet there is an excitement about the prospects for bitcoin and we know some investors are looking to allocate a percentage of their portfolio to bitcoin.

That’s why I’m pleased to announce the launch of the Bitcoin Investment Trust (BIT), a private vehicle for institutional and accredited investors that is invested solely in bitcoin and derives its value from the price of bitcoin. Qualified investors gain exposure to the price movement of bitcoin without the challenges of buying, storing and safekeeping bitcoins. Alternative Currency Asset Management, LLC, a wholly-owned subsidiary of SecondMarket, is the sponsor of the fund.

SecondMarket has a long track record of making alternative assets more accessible to a broader group of investors. Our infrastructure enables streamlined capital raising, investor communication and periodic liquidity for private funds, so we believe a private, bitcoin-related fund is a perfect fit for the SecondMarket platform.

Bitcoin is clearly not for everyone. If you don’t know much about bitcoin, take a look at our education center and perhaps it’ll pique your interest. But if you’re an accredited investor interested in getting exposure to bitcoin, take a look at the materials and decide for yourself.

- Barry Silbert, CEO of SecondMarket


The bitcoin ecosystem is constantly changing and evolving. That’s why SecondMarket has launched Bitcoin Buzz, a newsletter that gives you a high-level overview of the biggest and most important bitcoin headlines, regulatory updates and signs of cultural adoption.

Check out the first issue of Bitcoin Buzz and be sure to subscribe to the mailing list.

Barry was on CNBC’s Squawk Box this morning. During his segment, he discussed the significance of general solicitation, SecondMarket’s new general solicitation product and the SEC’s accreditation verification requirements, and the company’s efforts to make bitcoin more investable.

To learn more about SecondMarket’s new product, please click here.

SecondMarket today released the following statement from Founder and CEO Barry Silbert on the Securities and Exchange Commission’s adoption of amendments to eliminate the prohibition against general solicitation and general advertising in certain securities offering conducted pursuant to Rule 506 of Regulation D under the Securities Act and Rule 144A under the Securities Act, as mandated by Section 201(a) of the JOBS Act:

“I applaud the SEC for fulfilling its mandate under the JOBS Act to lift the 80-year-old ban on general solicitation and general advertising. Today’s action will have a significant impact on the capital formation process, and is an important step forward in bringing today’s regulations into the 21st century.

“After today, a much deeper, broader group of accredited investors will have the opportunity to hear about – and potentially invest in – private companies and funds.  By allowing issuers to solicit to a broader group of potential investors, the SEC has today showed its commitment to democratizing the investing process and putting an end to yesterday’s “old boy” investor networks. 

“The lifting of the ban on general solicitation will prove to be transformative for issuers and investors. The SEC’s final rule will include a non-exclusive safe harbor provision for accreditation that will allow for issuers to delegate that responsibility to third parties, a recommendation that SecondMarket proposed to the SEC last year. In anticipation of the final rule, SecondMarket has developed a general solicitation product that will enable issuers to handle the increased volume of investor interest and heightened regulatory requirements that will accompany their general solicitation efforts.

“For issuers that decide to generally solicit, and don’t have the infrastructure or resources to manage incoming interest, they will be able to offload that administrative burden to SecondMarket, which has spent more than a year developing the infrastructure to satisfy the SEC’s requirements to verify the accreditation status of investors. We believe that our general solicitation product and our proprietary accreditation verification process will soon become the industry standard, and we look forward to partnering with a diverse group of private companies and funds as they begin to experiment with the various promotion avenues that are now available to them.”

Bitcoin Infographic