SecondMarket has been walking a tricky line building its private-stock marketplace: The rich, accredited investors who can actually buy stock through the market are a very small and select bunch, but interest is rampant in companies like Facebook and Twitter. That’s great for SecondMarket’s brand — but it can’t disclose much about what actually happens in its marketplace without incurring regulatory wrath.
On Friday, SecondMarket took the wraps off an update that aims to bridge the gap. I got a demo at SXSW.
The site now functions more like a social network for investors (and startup employees with shares they might someday want to sell to those investors). It’s Facebook meets Yahoo Finance meets a giant Hoovers-like back-end database of corporate information.
The back-end is SecondMarket’s secret sauce. Drawing on CrunchBase and other data banks, SecondMarket’s analytics team created profiles for 12,000 privately held companies. The profiles offer snapshots of all the key data (executives, funding rounds, recent news, headquarters, etc), and also let users “watch” companies of interest. No surprises: The top-watched companies right now are Facebook, Twitter, LinkedIn, Groupon and Foursquare.
Active investors can advertise their private-company holdings, if they choose to — either publicly or to their network of connections. SecondMarket founder Barry Silbert made his profile public, touting his stakes in companies like Vator.tv, ProFounder and Slated. This could be catnip for investors like those on AngelList, who use their seed stakes as social calling cards.
The goal is to make SecondMarket the premier site for information on private firms. “We wanted to create an experience where anyone can come for education,” says Dominic Preuss, SecondMarket’s chief product officer, who joined the company six months ago.
The hope is that some of those it educates will mature into buyers — or sellers. SecondMarket has 55,000 registered investors perusing its offerings. It needs a steady stream of employees with equity in private firms to give them something to buy. To that end, the company is adding features to its new platform to help those with startup equity monitor their holdings — and the potential buyer interest in them.
One fun fact: The private-company marketplace is the most visible part of SecondMarket’s business, but it’s still a tiny sliver of the seven-year-old broker-dealer’s overall operation. Since launching its private-stock market in April 2009, SecondMarket has done $500 million in total volume (a full 40% of it in Facebook stock). Last year, the company’s total transaction volume was $10 billion. Facebook may be sexy, but the market for auction-rate securities is a whole lot bigger. -Stacy