Over the past decade, an investor would have done better in the small-cap Russell 2000 index than in VC. Indeed, since 1997, returns for the average VC investor have been negative, after fees.
a never-ending game of cat and mouse for developers/facebook
Want to own a piece of Tesla Motors? Facebook? LinkedIn? Unless you're a founder, employee, or a funding source for these companies, you're out of luck. That's what separates "public" companies from private: anyone can buy a piece of a public company on an open exchange. There are no wide-open exchanges for private company shares.
But there is now, at least to a degree. Sharespost is a marketplace where people who own pre-public shares can connect with investors who want that stock. Since these private companies also don't have open, audited books where potential investors can study up on the companies, Sharespost collects analysts' research on the companies in its market to help buyers and sellers agree on a value for shares being transacted.
The added values of the Sharespost marketplace, according to CEO Greg Brogger, are several. First, it connects buyers and sellers. Second, it helps with "price discovery," as noted above. Third, it facilitates the transactions by handling the paperwork and helping buyers and sellers work through contingencies attached to employee stock awards. And fourth, through an arrangement with US Bank, it processes and clears all the money.
Sharespost is not for the casual investor who wants to nab a few shares of Facebook for fun. Each transaction incurs a $2,500 fee (for both buyer and seller) from US Bank. And you must be an "accredited and sophisticated buyer" under SEC Regulation D, which limits the universe of buyers to people with substantial invested assets and experience. There is no such limitation for sellers. So if you're sitting on a few thousand shares of beached stock at a biggish private company, and baby needs a few thousand new pairs of shoes, Sharespost might be able to help you out.
Sharespost has only 100 companies in its market so far, and most have no activity.(Credit: Screenshot by Rafe Needleman/CNET)
Bizzarely, Sharespost does not collect a piece of these transactions. Brogger doesn't want to make his company a brokerage. He doesn't want it to be seen as profiting from individual transactions on his site. Instead, he charges buyers and sellers a $34 a month fee for using Sharespost. "There are a lots of transactions happening now in coffee shops," Brogger says, and with his model, he doesn't care if that continues or if the sales are closed through the US Bank clearing system. Although with the amount of money per transaction involved here, I don't see why he doesn't go for a small bit of the action.
Private for a reason
I went into my meeting for Brogger with arguments lined up against the very idea of this service. Private companies don't have reliable information about them, I said. Naive employees will get taken. Brogger's counter was two-fold. First, he said, the analyst reports help people agree on a fair value. Second, nobody has to trade if they don't want to. It's a fair market.
I said that employees in private companies are awarded shares they can't sell independently for a reason: to incentivize them to move the company toward a liquidation event, so their shares become worth something. To this, Brogger says that this incentive is now largely moot, since the IPO and M&A markets are effectively shut down. People still need to buy houses and cars, and send kids to college. This market makes people's shares somewhat liquid.
Brogger also told me that this market could help venture funds wind up their businesses. 250 funds were started in 1999, he told me, and most are 10-year funds. They need to do something with their shares, and this market makes it possible to more easily close out at least some of their positions.
It's worth noting that only vested shares in pre-public companies can be traded. You can't go to work for Digg today and immediately sell your unvested shares for cash. Also, Sharespost will only transact shares that have been held for a year, and only at companies with a valuation more than $100 million. Brogger doesn't want people buying to flip, or manipulating smaller companies.
The value so far
To date, Sharespost, which launched last week, has executed one transaction: a $25,000 sale of Tesla shares. See more at the San Jose Mercury News.
There's more value here for you an me, though, even if we don't have private company shares or don't want to buy some. The research on the site is open even to nonpaying users. As TechCrunch points out, this is valuable and interesting data, and gives a pretty good insight into the realistic value of many private tech companies.
While I still fear that people could get taken in this market due the relative lack of oversight and control compared with public markets, it's also true that there are many private company employees forced to hold on to shares in their companies that may be valuable to somebody today but worthless tomorrow--these companies could fold, after all, leaving their employee shareholders with nothing.
Company execs may not want their employees to offload their shares, but they might also want to give them some rewards for their hard work before the company makes its shares more clearly valuable might in fact embrace the Sharespost concept. They could do this by contracting with Sharespost to administer a program that allows Sharespost to transact specified percentages of employees' shares. Or at the very least, the existence of Sharespost might encourage private companies to write some passages into employee contracts specifying what employees may and may not do with all or part of their pre-liquid stocks. The very concept of a market for pre-public shares could, in other words, make them even more valuable as employee incentives for cash-strapped start-ups.
Buyers and sellers agree to prices through open bulletin boards.(Credit: Screenshot by Rafe Needleman/CNET)
I was just sending a tweet about some excellent chicken livers I'd eaten when I espied some information that made my acid perform a refluctive motion.
According to eMarketer, three different digital actuaries declared that Twitter traffic has performed a slight plummet.
While comScore suggested a drop of 8.1 percent in October and Compete estimated 2.1 percent, while Nielsen, that apogee of accuracy, declared a 27.8 percent decline between September and October.
Nostradamus is on Twitter. Does this secure its future?(Credit: CC RachScottHalls/Flickr)
It seems that these figures, blessedly inconsistent as they are, are not taking account of all the third-party and mobile methods of keeping everyone up with your eating, drinking, reading, philosophizing and socializing.
But is it also possible that some people will simply never participate in the Twitter phenomenon, finding it either annoying, uncool, or even too much effort?
With Twitter intent on becoming more businesslike (why does the word 'more' seem slightly redundant here?), 2010 seems destined to be the year that the microblogging service becomes either de rigueur or dazed and confused.
Will Twitter become a permanent habit or a disappearing, perhaps even elitist, fad? I'll tweet Nostradamus and ask him.
You didn't know Nostradamus is on Twitter? Where have you been?
this doesn't take into account all the 3rd party ways that people use twitter.... but are that many ppl really using other clients? don't newbies first start at twitter.com and then migrate over -- web traffic shouldn't drop so much?
He revived Apple and remade entire industries, defying the worst economic conditions since the Great Depression -- and his own serious health problems.
NEW YORK (CNNMoney.com) -- Apple's lips are sealed about its widely rumored tablet computer, but technology experts are giddy about the device, already exclaiming it will be the gadget to end all gadgets.
Executives at Apple (AAPL, Fortune 500) never discuss products that are in the works, so there's no confirmation that the thing even exists. But rumors are circulating that Steve Jobs and Co. have designed a magazine-sized, touch-screen, hand-held, all-in-one device that is half-iPhone, half-Macintosh computer.
It's supposedly going to make its debut in the next few months, and you can have it for the low, low price of $600. Or $800. Maybe $1,000. No one's really sure.
If the rumors are true, the tablet will be able to do basically everything a gadget could possibly do. It's an e-reader, a gaming device, and a music player. You can watch TV and movies on it and surf the Internet (or so we've heard). And it will have thousands of third-party apps available for it ... or maybe it will run Mac OS X. That's all still unknown.
Coolest device ... ever? Maybe. Some analysts are channeling their inner-Frodo, saying the Apple tablet will be the one gadget to rule them all.
"This will be the next big thing," said Laura DiDio, principal analyst at ITIC. "Apple is going to wow everybody with the tablet."
Any time Steve Jobs gets on stage, the expectations are incredibly high, but they are especially lofty for the tablet. Analysts and investors are saying that this device could revolutionize the handheld world in the same way the the iPhone changed the smartphone market.
"The tablet will change the game, because Apple will throw down the gauntlet at the competitors, and force them to follow along," DiDio said.
According to DiDio, the tablet will have a 10-inch to 12-inch screen and a high-end graphics card that will enable stunning resolution -- even more so than the iPhone and iPod Touch. She said the device will come in several different models that offer varieties of Internet connections, such as Wi-Fi or 3G, perhaps through a contract with AT&T (T, Fortune 500).
Another cool feature will be the Web cam, which business travelers will be able to use for video conferencing on the go, DiDio said.
Some analysts say all of those features will kill other single-function handheld devices, making the Apple tablet the go-to handheld device for computing, Internet browsing, reading, gaming and entertainment.
"Apple will come out with the tablet and blow everyone away," said Dan Ackerman, senior editor at CNET. "Instead of taking along a Kindle and an iPod, that [tablet] could become the device you carry with you."0:00 /5:02Apple succeeds despite flops
The cheaply priced netbook market may also take a hit when the tablet comes out. Apple typically prices their products higher than competitors, because they install top-of-the-line hardware, but DiDio said Apple learned from its mistake of pricing the original iPhone at $599, pricing out many potential customers.
"The Tablet will be awesome, and my guess is that it will be an instant hit for people who loved Kindles and people who want netbooks," said David Wertheimer, executive director of the University of Southern California's Entertainment Technology Center.
Wertheimer said he finds it hard to comprehend how the tablet will replace all other on-the-go tech products. "But then again, what I can't imagine, Steve Jobs often can," he added.
...Or the fizzle may fail. Not everyone thinks the Apple tablet will be the gadget to end all gadgets.
"What we've found in the past with these multi-function devices is that they're better for ad-hoc purposes, like quick and dirty tasks," said Zeus Kerravala, an analyst with Yankee Group. "They're not for any prolonged, high-performance use."
For instance, smartphones have cameras for quick snapshots, but when you go on vacation, you're probably going to want your digital camera to come along with you for high-quality photos.
Kerravala said the same logic applies to the tablet's other functions, including its e-reading capability: "If you want to sit and read a book, the ergonomics of a device that's specifically designed for reading are going to be better."
Similarly, only 3% of people whose cell phones can play music say they use their phone as their primary music player, according to a Yankee Group study. Even if it means carrying around two devices, an MP3 player is bound to have a better user experience than a multi-function cell phone.First Published: November 16, 2009: 7:47 AM ET
I can't wait for this. I'll be first in line to get one!