Xpert Financial Inc., with high-profile backer Tim Draper behind it, is to unveil its private company stock exchange on Friday with a vow to revolutionize the secondary market.
The San Mateo company, which changed its name this month from XChange, says it won approval from the Securities and Exchange Commission to operate an online electronic trading operation similar to the Nasdaq.
The startup has raised almost $3 million from Draper and other angels and expects to see trading kick off in the first quarter. Draper is founder and managing director of Draper Fisher Jurvetson, but invested in the company outside of the firm.
The startup made waves in February 2009 when it first took money from Draper but was slow to get off the ground. Chief Executive Thomas Foley (pictured) says it remained in stealth as it worked with the S.E.C. Xpert is presently seeking an institutional round of capital that Foley says targets several million dollars.
He adds that the S.E.C. approval gives Xpert an immediacy that the other marketplaces, SharesPost and SecondMarket, lack. The company’s business plan is to trade not only private company shares in the secondary market, but to give startups the option to raise money by issuing shares directly, as they would in a private placement with venture capitalists or other investors.
Volume in the secondary market has jumped this year thanks to an explosion of interest in the shares of Facebook, LinkedIn and a handful of other big-name private companies. Secondary marketplace SharesPost says it, too, plans to branch into private placement, or directly issued, shares.
The Xpert business plan hinges on its ability to sign up potential investors and startups, which it is attempting to do now. It intends to permit companies to pre-approve buyers so that trades can take place instantly when buyers and sellers are matched. It also promises to make more information about private companies available to investors and to help companies limit their shareholders to less than the S.E.C. filing threshold of 500.
“We see this as a financial revolution,” says Foley. “We’re definitely attempting something new.”
The company has so far not been contacted in a preliminary probe of the secondary market that the S.E.C. recent began, Foley adds.