Of the privately-held companies with the most interest from potential investors on SecondMarket Holdings Inc., Cambridge’s HubSpot Inc. tops a handful from Massachusetts.
But shares in the company aren’t likely to be sold via the online marketplace any time soon. While liquidity for employees and other shareholders is nice, there’s also a significant “distraction cost” associated with it, said Brad Coffey, director of strategy and corporate development at the marketing software firm.
“There’s a trade-off between the value it can drive for our employees and the cost of it,” he said. “It’s not a great fit for us right now.”
With the window for initial public offerings narrow, shares in startup and venture-backed companies are currently looking even more illiquid than usual. That’s driving more private shareholders to increasingly turn to marketplaces like New York-based SecondMarket. The company reports it brokered $435 million in private stock sales in the first three quarters of the year, up 75 percent from the same period of 2010.
Though SecondMarket is not the only player (its top rival is SharesPost Inc. of California), the service has made its name as a site for trading in shares of Facebook.
Naturally, the company is “constantly looking to work with more companies,” said Ali Byrd, an East Coast vice president at SecondMarket. So the company has started compiling how much interest different companies are getting from potential investors on the site, who can “watch” companies on the site and get updates about them.
Three Massachusetts companies ranked the highest in a recent survey by SecondMarket — HubSpot (192 watchers), mobile app firm Scvngr Inc. of Cambridge (75 watchers) and robotics technology firm Kiva Systems Inc. of Woburn (41 watchers.)
SecondMarket doesn’t provide a full list of most-watched companies, but a search on the site revealed that at least one other Massachusetts company is getting attention on the site; Cambridge online video services firm Brightcove Inc. — which is in registration for an IPO — has 119 watchers.
Byrd said the “watch” classification is comparable to getting a “like” on Facebook, and that SecondMarket doesn’t disclose whether any companies are actually seeing shares traded on the site.
Shares can only be traded on SecondMarket with approval from the company’s executive leadership, he said, meaning individual employees can’t sign up to sell shares. Each company can also put limits on how often, and to whom, shares are available for sale, he said.
Seth Priebatsch, founder and top executive at Scvngr, said in an e-mail that SecondMarket is an “awesome concept.”
“It’s definitely exciting to see all the interest around Scvngr. We get enough emails from VCs every day and it’s nice to think that there’s somewhere else for them, and other interested parties, to turn,” he said.
But Priebatsch said shares in the company aren’t being traded there right now — and that he expects people would want to hold onto shares in Scvngr. The company is seeing fast growth in business around its two apps — its namesake digital scavenger-hunt app and its loyalty/payment app service, LevelUp, he said.
The shares are “worth a lot now, but nothing compared to what it’ll be in a year or so,” Priebatsch said of the shares.
At HubSpot, company officials have had conversations with SecondMarket about the service, which HubSpot believes is “a great opportunity for companies that are looking to provide liquidity to their employees,” Coffey said.
But about half of HubSpot’s 300 employees have less than a year with the fast-growing company, he said. And since company employees don’t see any stock vest until after completing one year with the firm, few employees actually have anything to sell, Coffey said.
HubSpot also doesn’t want employees to end up focusing on performing due diligence and other complications of selling stock, he said. “We’re very focused on trying to deliver value to our customers, and to grow a great business here in Boston. We want to stay on our mission.”