Secondary trading of private company shares has become the hottest topic in venture capital. The SEC is investigating, VC fund investors are worried about conflicts of interest and many of Wall Street’s biggest banks have begun to participate.
But almost all of this has revolved around shares in just five companies: Facebook, Groupon, LinkedIn, Twitter and Zynga.
What happens when those companies either are acquired or go public (LinkedIn, for example, has already filed for an IPO)? Does the direct secondary market return to its past life as a cottage industry, or is there a next generation of companies that can fill the void?
To get a better sense of what could come next, I asked SecondMarket to send over a list of companies that have received the most buy-side interest from its users (after the Big Five). The list is in order of popularity, but aggregated over the past year. Also, please note that SecondMarket has not completed trades in all of these companies:
- Craigslist
- Yelp
- Bloom Energy
- Pandora
- eHarmony
- Etsy
- Foursquare
- Gilt Groupe
- Zillow
- Huffington Post
- Skype
- Chegg
- DropBox
- Quora
- Yammer
Not a bad group, even if two of them — Pandora and Skype — already have filed for IPOs. And even if a third, HuffingtonPost, recently was acquired. Also interesting to see Bloom Energy on there, given that all of the others involve Internet technologies (including, to a certain extent, Skype).
It’s obviously unlikely that any of these companies will become the next Facebook — whose shares, by some accounts, make up over half of today’s direct secondary trading volume — but most of them certainly will have employees looking to liquidate vested options over the next couple of years. And so long as prospective buyers keep digging past the largest names, there will continue to be a vibrant secondaries market. Well, unless the SEC intervenes…