August typically equals unbearable heat, last-minute vacations, and a lot of catching up with family and friends. With that said, we want to catch up with you and share what we’ve been up to over the past few months.

First off, we partnered with a number of dynamic private companies over the last six months who utilized our capital introduction or transaction management services to help them create liquidity programs tailored to their goals and objectives.

  • Capital Introduction: When a company wants to utilize SecondMarket to bring buyers to a transaction, we work with the company to define the size of the potential investment and the desired investor profile. We then find buyers that fit the profile through our curated network of accredited and institutional investors, and present the buyers to the company, who decides which investors to include in their liquidity program on SecondMarket.
  • Transaction Management Services: Companies utilize our online enterprise solution, which provides a centralized platform for automated transactions and better efficiency. Companies are increasingly using the services to perform block trades of stock, tender offers and company buy-back programs.

So why did companies use our services? Well, we surveyed our clients and found that they partnered with us in 1H 2012 for a number of reasons. Some companies’ sought to re-align their investor base in order to replace early shareholders with new strategic investors who are supportive of the company’s long-term vision. Other companies used SecondMarket as an effective tool to attract and retain key employees, and some simply wished to satisfy liquidity demands of their shareholders.

Although we don’t publicly divulge specific names of our clients, we are excited to reveal a six month company snapshot that, for the first time, paints a detailed portrait of the “typical” private company that uses SecondMarket. This composite was created by using data from the companies that we partnered with to create customized liquidity programs in the first half of 2012.

The next chart is a breakdown of the first six months of 2012, by industry of the companies. Companies in the Gaming industry made up nearly half of the liquidity events in 1H 2012, with 48.3%, and Consumer Web and Social Media came in second, with 21.8% of liquidity events. The Education and Financial Services sectors represented 21.8% and 10.9% of liquidity events, respectively, and the Entertainment and Music industry rounded out the pie with a small sliver of 0.6% in completed liquidity events.

The following chart provides detail on the types of buyers on SecondMarket in 1H 2012. Hedge funds comprised the lion’s share of transactions by dollar value, with 47.9%. Family offices followed suit (21.5%), with asset managers (15.3%), issuers (8.9%), accredited individuals (6.0%), and private equity funds (0.3%) among the investors who joined the companies’ shareholder bases.

As for sellers, companies allowed a large percentage of current employees (59.8%) during the first half of the year to secure some liquidity and taste some of the success they created. Former employees (24.1%), investors (13.8%), and a small number (0.6%) of founders were also approved by the companies to obtain a controlled amount of liquidity through SecondMarket.

We allow institutional and accredited individual investors on SecondMarket to submit Indications of Interest (“IOIs”) in private companies (regardless of whether the companies are currently running liquidity programs). Companies can use this information to help guide their decision-making and timing for capital raising and/or secondary liquidity.

The chart below breaks down the buyside IOIs by industry in the second quarter of 2012. Consumer Web and Social Media maintained the top spot in Q2, with nearly $265 million in buyside demand. Software saw nearly $50 million of interest from potential investors, and Mobile followed with $38 million of demand. Other industries, like Music and Entertainment ($23 million), Financial Services ($22 million), and Payments ($20 million) also saw increased buyside interest in the second quarter.

We have also created a heat map that indicates investors’ demand based on their location. The map below highlights California, New York, and Texas as the top three states with the most investors submitting buyside IOIs on SecondMarket in Q2, but fair numbers of investors from burgeoning tech sectors like Washington, Illinois and Massachusetts also indicated their private company investment interests on the platform.

And now it’s time for the SecondMarket Rising Stars! Every quarter, we calculate the VC-backed startups with the largest quarter-over-quarter percent increase in total watchers on our platform, and provide you with a ranking of the most exciting startups. Previously a SecondMarket Newbie, Airtime scored the top spot in Q2, with a 207.7% increase in watchers (who says blowout, celebrity-filled launch parties are overrated?!). Warby Parker (+127.9%) and Stripe (+117.2%) held onto their second and third place spots, respectively. SoCal-based open-data platform, Factual, and Palo Alto-based creator of the Learning Thermostat, Nest, also graduated from the Q1 Newbies and made their debuts to the Q2 Rising Stars.

The SecondMarket Newbies list is all about momentum. These startups begin the quarter with less than ten watchers and gain significant traction over three months. Video “capture and share” startup Viddy, with 99 watchers, and video startup SocialCam, with 48 watchers, held the top spots on the Newbies list in Q2. SocialCam was subsequently acquired by Autodesk in July 2012. Cambridge-based Localytics, a mobile application analytics platform, stole the third spot in the Rising Stars ranking, and iCouch, a video-counseling site located in NYC, took fourth place. Rounding out the list was MyLife, an online personal relationship manager based out of LA.

It is vital to note that the term “private company” is not restricted to venture-backed startups. After all, our community bank pilot program, which we kicked off earlier in 2012, has continued to successfully help regional banks provide their shareholders with liquidity. In the meantime, a number of community banks grabbed the attention of our platform participants in Q2. In our list of Top Ten Most-Watched Community Banks for the second quarter, Lubbock National Bank in Texas was the most-watched community bank on the list for the second time this year. Team Capital Bank (PA) jumped two spots, moving from the fourth to second place, followed by North Jersey Community Bank (NJ), The Bank of Princeton (NJ), and Square 1 Bank (NC). Rounding out the rest of the top 10 list was Legend Bank (TX), TrustAtlantic Bank (NC), Palm Desert National Bank (CA), Silvergate Bank (CA) and in its first appearance on the list, Pascack Community Bank (NJ).

If you are affiliated with a private company and are interested in learning more about how SecondMarket can partner with your company, please click here.

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Important Disclosures

Please note that the information in this report does not constitute an offer to sell to, nor a solicitation of an offer to buy from, nor shall any securities be offered or sold to, any person in any jurisdiction in which such an offer, solicitation or sale would be unlawful. There is not enough information contained in this message in which to make an investment decision and any information contained herein should not be used as a basis for this purpose.

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