That, at least, is one takeaway from the index launched today by private stock-trading site SharesPost, which aims set approximate valuations for hot venture-backed companies.
The SharesPost Venture-Backed Index, which crunches data from four sources to set values, currently covers seven companies, with valuations ranging from $227 million to $11.5 billion. They include Facebook (estimated value of $11.5 billion), Zynga ($2.6 billion), Twitter ($1.45 billion), LinkedIn ($1.3 billion), Tesla Motors ($1.28 billion), Linden Lab ($383 million), and Serious Materials ($227 million).
SharesPost CEO Greg Brogger says the valuations are not intended as a hard-and-fast price point for setting sales prices. Rather, the idea is to give potential buyers and sellers of private company stock some easy-to-access data points to consider when setting up a transaction.
“Since companies aren’t going public till they’re a billion dollars in valuation, you have these really important companies that are a mystery to people in terms of what they’re worth,” Brogger says.
The sources used to come up with final number include the price of the last private share transaction, the midpoint between highest and lowest bid and ask prices, average of private research firm valuations, and valuations from a venture transaction within the past six months. The index valuation is the average of those four inputs, which are also listed separately.
Private share exchanges – of which Santa Monica-based SharesPost and New York-based SecondMarket are the most prominent – started drawing attention amid the depths of the IPO market doldrums last year. With no one going public, the idea was that private share exchanges could provide a forum for shareholders in private companies to get a little liquidity and for private investors to get a slice of a hot venture-backed company.
With the IPO window opening up some (well, at least in terms of companies filing, if not actually making it to market), Brogger says the dynamic shouldn’t change much, since still only a tiny fraction of venture-backed companies will make it out. Plus, there is some appeal to many investors in buying private shares in a company that is expected to go public. For instance, after Tesla filed to go public, Brogger says, trading in private shares of the company rose.
Today, Brogger says, the median trade value on the SharesPost platform is for about $250,000 worth of stock. It typically costs $2,500 to close the transactions, and buyers have to hold on to their shares of at least a year before selling. Currently about 95% of the site’s users are U.S.-based.
In terms of sellers, Brogger says angle investors and early employees are the most active ones. It’s also not uncommon for founders to sell some holdings, he says, though typically not more than 15% to 20% of their total holdings.