SecondMarket, the marketplace for alternative investments such as company options and private company stock trading, announced yesterday that it has launched operations in Israel (the Israeli site is live already here). This could mean big bucks for Israeli entrepreneurs, as they will be able to sell stock and options to interested investors before exiting the company. SecondMarket’s effort in Israel will be led by Ranan Lachman (VP), who was previously at Oppenheimer & Co, one of the largest underwriters for Israeli startups, where he was involved in fundraising and IPOing numerous Israeli private companies. The Israeli operations will be based in Herzliya and New York.“Israel is a hub of technology and entrepreneurship, so it is only natural for SecondMarket to build and cultivate an Israeli presence”, said Lachman.
Given Israel’s active private company sector, the move makes perfect sense. SecondMarket will provide Israeli companies with the tools to access capital and facilitate secondary liquidity for shareholders, including bankruptcy claims, auction-rate securities, and limited partnership interests in private equity and real estate funds.
SecondMarket’s founder and CEO Barry Silbert said in the announcement:
“Israel is an entrepreneurial hotbed and we are excited to work with the country’s most dynamic private companies. Our private company market allows companies to provide secondary liquidity to shareholders in a controlled environment where the companies dictate the parameters of the market. Our model has been extremely successful in the U.S. and we believe it will also resonate in Israel.”
Having the highest number of startups per capita in the world, means that some of the 300,000 technology employees in Israel worked for more than one private company, for which they hold stock options. Demand permitting, SecondMarket’s platform in Israel will allow these employees to sell shares in a company-controlled environment prior to an IPO or M&A transaction.
So how strong can we expect the demand to be in Israel? SecondMarket has more than 20,000 global buyers buyers (market participants) that already completed more than $350 million in transactions of private company stock and options. It is said that Facebook, LinkedIn and Twitter shares account for the majority of the trades in terms of volume, but like in the public stock market, I expect speculators to ‘place bets’ on growing sectors.
SecondMarket was founded in New York in 2004 and has grown substantially since then. It was recently selected by the World Economic Forum as a 2011 Technology Pioneer and will be recognized at the Annual Meeting in Davos.