Before, investors in private companies had to go through secondary market exchanges’ accreditation processes to buy into late-stage startups pre-IPO. Before, they were subject to hefty transaction fees to jump into shares of startups like Facebook, so they would have to realize a share value gain just to hit breakeven. That was before.
Michael Moe, one of the founders of GSV Capital Corp., changed that. Moe, and GSV, recently brought to Nasdaq a $50 million mutual fund that will be put to use buying—you guessed it—stakes in private stock.
Thus far, GSV has garnered very little press. And and for good reason: It hasn’t bought anything yet. In fact, since its shares debuted, they’re down. However, Moe said, without identifying targets, GSV Capital is in talks to buy shares of several private companies. Investors won’t get a say in what gets bought—they’re just along for the ride, and should consider themselves fortunate to get any secondary market action at all if they can’t get accredited past Scottrade’s minimum threshold. But Moe said he will report the fund’s holdings in private companies to investors.
This, he acknowledges, could take GSV out of the running for stakes in some private companies with management that demands buyers agree to NDAs on private share buys.
“We want to be very transparent with the people in the fund,” Moe tells peHUB.
While some investors are flying blind (or, close to it) trying to buy pre-IPO stocks as pundits warn of bubble trouble, Moe and NeXt Asset Mangement, GSV’s manager, rely on data generated by the affiliated research firm Moe also founded, NeXtup Research.
The fund will concentrate specifically on late-stage companies nearing an exit, Moe said, and will pay out investors from realized gains on an episodic basis as opposed to a quarterly dividend process. Ninety percent of gains will be redistributed, Moe said.
If Michael Moe sounds familiar, but GSV doesn’t, that’s because the firm affiliated with the fund—Global Silicon Valley Partners—is in the process of rebranding from its prior identity, NeXtup. The listed special purpose vehicle initially debuted on markets in late April under the name NeXt Innovation, but that, too, is getting a fix. Moe should be a familiar name, too, as he co-founded ThinkEquity and spent seven years as CEO.
GSV Capital Corp. will make buys in up to 30 private stock companies—which means buyers of the company’s stock will be getting into much more than just the usual suspects on secondary markets that everyone from the day-trading Dad to the pension fund manager has sought.