- Founded platform for trading private tech stocks
- New loan program for holders of shares, options
- Became profitable as exchange for Facebook shares
SharesPost, which offers liquidity to shareholders in private companies, has expanded its offerings by launching a non-recourse loan program, enabling shareholders to borrow against their stock and access liquidity without sacrificing the potential upside.
This kind of financing has historically had problems achieving scale (originating enough borrowers and attracting institutional capital). SharesPost, however, is “unique in the space,” and the program is backed by a group of eight large financial institutions, including hedge funds and lenders, CEO and Founder Greg Brogger says.
The pre-IPO market for Facebook stock put SharesPost on the map. When the company went public, “it was a time to step back and look at the business: Does it have a future? The main driver of revenue just vanished.” The SharesPost team concluded that Facebook was only the beginning: “The same logic that drove [Mark] Zuckerberg and the board to keep it private as long as they could would appeal to others. They just hadn’t gotten big enough yet. It was a leap of faith that we made when we went about building the platform that we have today.”
“The idea for SharesPost came about really out of the financial crisis of 2008 because there was a real liquidity crunch in the venture market,” Brogger said.“We started looking at ways maybe to solve that problem.”
Brogger had been introduced to tech as a securities lawyer at Wilson Sonsini Goodrich & Rosati, but he soon realized he was “more interested in the business side than the legal side,” he recalled.
“It was a great place to have started in Silicon Valley,” Brogger said of the law firm, “to really learn how startups work and how they get funded.” He applied that experience at a couple of young companies “that had good exits,” then co-founded an incubator in 2007 and started kicking around different business plans.
The drop in the number of IPOs was a topic of intense discussion, with most observers viewing it as a cyclical downturn. But Brogger and his team saw structural factors at work — regulatory, market, as well as “founder preference, what they wanted to do with their companies.”
“If it’s the case that they want to stay private longer, then they’re going to be getting much larger without having access to the public marketplaces and solutions that they had in the past,” Brogger said. It was a prediction that would be borne out on a grand scale, starting with Facebook.
At the time, “there was no technology to match buyers and sellers; it was all a web of Sand Hill Road connections.” With multibillion-dollar market caps, “that breaks down. You can’t support liquidity for those companies in that way.”
Greg Brogger, CEO, SharesPost. Photo courtesy of the company.