Gadgetory

hey everybody I'm Hollywood from cnet com here at South by Southwest 2012 we are at the second market recovery house which is actually the brainchild fan right here yeah we're joined here today with Barry silver he's the founder and CEO SecondMarket now when we first heard of second market the company we know of it kind of as the company where people with let's say private shares and Facebook are exchanging them so can you kind of actually yeah that all honestly no that's what you guys are you know kind of over recognized and brought to the forefront with but can you kind of explain all that and other things that second market does yeah of course that so we're creating the next growth market the next Nasdaq we're creating the marketplace where all the fast-growing startups spend some time the number of years before they ultimately go public or as an alternative to going public going public nowadays it's really tough you got to be a billion dollar company you got to tell you it's hard to build a billion-dollar company so we're creating that that that spring training that bridge to get companies to that stage where they can allow the employees to sell some stock at the right time they can maybe raise some money and there's a real real real need for this and so we've had over a billion dollars in transactions it cost about fifty companies so far that's interesting i like what you say about i'm interested in what you said about if companies are not going to go public so you can actually allow a private company to have stock options that are worth something to employer group private investors right i mean imagine that imagine these options that we get instead of it being a lottery ticket actually having some real value so now it takes like 10 years to go public think about the ten years ago public no one plant staying at a company for ten years back r angel investors bad venture capitalists and so we're creating this this this interim step to give companies at least the ability to get to be able to go public or maybe as an alternative so one of the things that we we think about when we hear that also though is that does this more benefit i guess the employees and people that have the money to invest in these shares because at the moment this is not something i like someone like myself could jump and say i like to buy some shares of like someone from a startup company right now right well so we're regulated so we have to comply with the SEC rules the SEC rules say to be able to buy the stuff you have to be like a high net worth in bed I would love to see that change and I want to make that change hopefully in the next few years but for now it is limited to high-net-worth investors but I need to make him sell whether you're a rich person or a just out of school if you have this the private stock you can sell to us right but so it's not for us right now we're allies would be a public thing which is not the purpose that you're not your friend yeah you know the SEC wants to protect kind of the unsophisticated investors now why they tie net worth a sophistication I don't know but that's the SU I'm really smart I'm just kind of brokering so but really it sounds like in some ways at least for those companies that are going to stay private it's just a way for them to do more better maybe better venture capital raising in a way that can also benefit employee it's great for employees because it means that you can actually get some value it's really good for the companies from from raising money perspective because being able to tell potential investors hey you don't have to wait five seven ten years to get out you may be only have to wait one year or two years that that helps companies raise money more efficiently and definitely a better valuation well what does it do in terms of taking stock off the market for a company that is gonna go public like somebody already own all the good facebook stock and all the good prices I mean okay I'm not gonna be naive i know that's already true but what do you make it worse well think of it this way actually think we make a lot better because what what happens over the growth of a company is you have some early investors that want to get out who would sell it the IPO were soon after the company goes public but what we're doing is we're helping companies transition those early stage guys off the cap table and bring in new longer term investors who will not just hold in the IPO but by after the company goes public so we're actually taking a lot of kind of the supply off the market and bringing in value at investors it sounds like that because facebook is the extreme case you're really trying to serve more of the startup community but because Facebook districts and what I kill that's the name that's associated with right i mean that was definitely like the catalyst that come out during a lot of buzz but we have 20,000 companies profiled on SecondMarket right now and the thing that we're actually announcing today we're rolling out today is we're allowing all those companies to claim the presence on SecondMarket get themselves notice the investment community so whether they want to raise money or do some type of secondary liquidity they can now have a a showing to the industrial Republic so you've already created these profiles of company is it how do you create the profiles of companies do you think look promising yeah it's it's so companies request it so it's really easy to go on there it's free say hey credit profile for me or if they've done a round of financing whether it's angel or series a we've probably created a profile for them already okay and then they can go in and say hey that's me that's me and then what's really cool about it is it's it's a way for you to basically attract and track investor interest so even if you're not raising money it's kind of like your profile to the investing community because we have a hundred thousand investors on the system that want to invest in just these types of companies so you're like half linkedin half Nasdaq yeah okay I finally get it what that means you see a future then when in which a lot of started cuz it used to be at least you know in the boom that going public was the holy grail first startup or yeah do you see a future when the majority of startups don't try to do that III think at some point in the future there's not going to be a difference between public and private and there really shouldn't be what what is going to be is there going to be different marketplaces where second market we're all about being company friendly we're all about giving companies complete control over how their stock trades so I'm secondmarket you decide when your markets open might be once a year you get to decide who's allowed to buy and you disclose information but it's only two people you approve so you're not like having to file all of your your silly your secrets into the public see now but there's a check and balance built-in in filing your secrets to the public right so that shareholder relationship creates a fiduciary responsibility it creates transparent we do sandy downs I think nobody's making able to keep all the secrets well we're all about trust and transparency and so we require information be disclosed but just because we're not disclosing it to the whole world doesn't mean that it's not all the material information I mean companies have to file these long 10 k's 10-qs all these filings that no one action really even reads it really is trying to protect the unsophisticated investor well the journalists and investors and regulators read that information like you said your regulated by the SEC right so the SEC still has access to all of the stabilization absolutely okay and then like if i did a Freedom of Information Act request I would still be able to get this information on a company give a shot I well I mean you know where for as much transparency as possible so it's kind of interesting one of the exciting things about Facebook going public for a lot of users was ok now we get to look behind the curtain yeah yeah why I think I think you know the problem is as companies should not go public into the mature to the business model is mature and when you see his companies I'm used to be able to go public when they were much younger the market the public markets like the types of companies but today and when you look at some of the companies egg on public they've been destroyed in the public market it's it's very much a casino now it's high frequency trading its people short selling it's something that I don't want to be a part of as a CEO so I want to keep a company private and most entrepreneurs I knew do want to do that as well yeah no reason I know you guys would kind of go beyond this you you have some of the projects like investing in local banks and what all right helping them out as well right yeah yeah so what we've done is we've created this as I mentioned before this very large network of investors so 100,000 investors that want to invest in unique investments so what you're going to start seeing from second market actually very very soon is we're gonna start making available to all these investors unique investment opportunities things ranging from special fun vehicles that allow you to invest in certain types of private companies to real estate investments to fixed income investments stuff that you just can't find elsewhere we're going to deliver to you right into your any bumps okay so and then are you going to love you the SEC for up to smaller investors I found the one is like so rich people are getting Richard I'm getting mad well so my idea is I think there should be a test so you can either have a lot of money or you can basically take a financial literacy test and I've offered thats the SEC in fact we've offered to create it and I think I think that will happen but it's not going to be this year it'll be Bob for that example okay and then now before we let you go the other great service that you do to the people here of a suit in Austin and South by Southwest visitors is this recovery house that we're in right now how long have you been doing this so I'm actually a newbie to south why's this is my first year and so I yes and I'm having a blast already and so you know it's really kind of all about bringing together lots of great people we have some really cool parties over the next couple nights and we've got free coffee and free drinks so I'll see you yeah and i gotta say Austin wonderful town not good coffee so the fact that there's like blue bottle coffee here is same I can also tell that this is your first off myself question or you're still chewy cheery and trippy right now but I think give it a couple more days are the bags or banjo I try to develop I'm gonna start moping in like another interview like so we got you in a good time well thanks off your time thank you very you can find all of the interviews that we did here at South by Southwest at seen at tv.com there's a lot more good stuff to check it out