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The Evolving Capital and Liquidity Environment for ...

The Evolving Capital and Liquidity Environment for
Private Growth Companies - Workshop by Greg Brogger, Founder & CEO of Nasdaq Private Market at the NOAH 2013 Conference in London, Old Billingsgate on the 14th of November 2013.

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Nasdaq Private Market - NOAH13 London Presentation Transcript

  • 1. November 2013 The Evolving Capital and Liquidity Environment for Private Growth Companies NOAH 2013 Presentation CONFIDENTIAL CONFIDENTIAL
  • 2. Important Disclosures The information contained herein is provided for informational and educational purposes only, and nothing contained herein should be construed as legal or tax advice regarding any specific situation. You should consult with your own experts. Securities related services will be offered through a registered broker-dealer and alternative trading system affiliated with NPM called NPM Securities, LLC (NPMS). However, NPMS is currently undergoing the registration and membership applications with the U.S. Securities & Exchange Commission and the Financial Industry Regulatory Authority. Until such time as NPMS receives certain regulatory approvals and is operational, all broker-dealer functions will be provided by its affiliate, SharesPost Financial Corporation (“SPFC”). Additional services and functions will also be provided by NPM affiliates and partners, including SPFC, U.S. Bank, and Accretive Solutions. 2 CONFIDENTIAL
  • 3. The IPO Market Has Changed Fewer IPOs, higher valuations $ in millions 1991-00 Longer time to liquidity Years to IPO 2001-10 9.4 Avg annual # of IPOs 330 119 -64% 5.7 $208 Median market cap Median proceeds raised $398 $60 $124 +91% 3.1 +106% 2000 2005 2010 Source: Dealogic Source: Thomson Reuters 3 CONFIDENTIAL
  • 4. Rise of the Founders Many entrepreneurs don’t want to be public and the most successful companies are founder driven 4 CONFIDENTIAL
  • 5. Growth Company Lifecycle - 1999 $1B PRIVATE MARKETS Angels VC Firms $200M PUBLIC MARKETS SEC/EDGAR H&Q Research NASDAQ/NYSE Bulge Bracket Bankers DTC Clearing YEAR 4 550 IPO’s < THAN $50M (1996) 5 CONFIDENTIAL
  • 6. New York Times (January 2013)  “an unprecedented number of high technology startups, easily 25 and possibly exceeding 40, are valued at $1 billion or more”  “A year from now that might be 100,” said Jim Goetz, a partner at Sequoia Capital . . . Sequoia counts a dozen such companies in its portfolio. It is part of what he calls “a permanent change” in the way people are building their companies . . .” 6 CONFIDENTIAL
  • 7. Private Growth Companies Unsupported $1B PRIVATE MARKETS PUBLIC MARKETS Angels VC Firms $200M CAPITAL MARKETS NO MAN’S LAND SEC/EDGAR H&Q Research NASDAQ/NYSE Bulge Bracket Bankers DTC Clearing YEAR 4 550 IPO’s < THAN $50M (1996) 7 CONFIDENTIAL
  • 8. Why Is That Important? Angels can’t recycle cash into next startups  Employees can’t diversify and discount value of options  VC’s push for premature exits to justify new funds  Non-VC Investors can’t access growth companies  Private Companies can’t raise capital efficiently  . . . and so companies end up selling too early 8 CONFIDENTIAL
  • 9. What does “too early” mean? Exit chosen over achievable opportunity  Opportunity to deliver new product, conquer new market, attain market leadership, etc.  Opportunity to create some significant positive change for customers  Opportunity to increase valuation from achieving the next milestone 12/6/201 3 9 CONFIDENTIAL
  • 10. What do private growth companies need?  Low cost capital to grow – – – –  Access to investors to global investor community Platform to raise awareness Scalable way to tell the story Efficient financing process Liquidity for stakeholders – – – – – Control over financial disclosure Control over pricing Control over timing Control over number of shares sold Ability to turn it all off, when its time for IPO or sale 12/6/201 3 10 CONFIDENTIAL
  • 11. NASDAQ Private Market (NPM) NPM provides an integrated, total equity management solution that connects private companies with a global private investor network 12/6/201 3 11 CONFIDENTIAL
  • 12. NASDAQ Private Market Total Equity Solution  Take complete control of your equity program with an integrated end-to-end solution  Reduce costs, administrative burdens, and complexity associated with managing equity ownership  Leverage industry-leading standards for private transactions on a fully compliant platform  Connect with a broad range of institutional investors for capital market activities 12 CONFIDENTIAL
  • 13. NASDAQ Private Investor Network  Multi broker dealer network provides access to premier institutional investors  Companies retain control over which investors view information or transact  Build institutional relationships efficiently over time – not on the eve of the IPO 13 CONFIDENTIAL
  • 14. Benefits of association with NPM Control Your Cap Table    Consolidate all transaction activity in one place Restrict transactions with systematic rules Consolidate shares in hands of selected longer-term institutional investors Provide Liquidity to Key Stakeholders    Recruit and retain best employees Strengthen equity incentives Support culture of employee ownership Optimize Transition to Public Market    Optimize IPO timing by relieving early investor liquidity pressure Secure premier public market investors prior to IPO Reduce potential for selling pressure at lock up expiration Implement Safeguards    Employ secondary transaction compliance best practices Reduce potential for errors/omissions with standardized documents Enable only pre-vetted, approved investors to become shareholders Save Time and Money    Standardize digital processes and integrate execution, settlement, and record keeping functions Minimize management distraction Reduce legal and other expense 14 CONFIDENTIAL
  • 15. Client Benefits NPM’s Total Equity Solution addresses your firm’s unique needs and capital markets objectives throughout the firm’s lifecycle OBJECTIVES Recruit / Retain Employees GROWTH 2-5 years pre-IPO IPO RAMP 0-2 years pre-IPO PERMANENTLY PRIVATE IPO Independent ✓ ✓ Equity Compensation Exit Early Investors Goals Control Trading ✓ ✓ Goals ✓ Guide Price Discovery ✓ Goals ✓ ✓ Investor Connections ✓ ✓ ✓ Save Time and Money ✓ ✓ ✓ 15 CONFIDENTIAL
  • 16. APPENDICES CONFIDENTIAL CONFIDENTIAL
  • 17. Growth Company Pain Points  Competitive market for employees – undifferentiated incentives not helpful  Early employees need liquidity  Vested employees leaving to reduce risk  Early investors pushing for suboptimal exit  Suboptimal investors becoming shareholders  Difficult to efficiently connect with non-VC investors  Legal expense to manage secondary transactions  CFO and GC divert time to secondary transactions GROWTH COMPANIES use the NPM to create powerful employee incentive and control the market for their shares 17 CONFIDENTIAL
  • 18. Pre-IPO Company Pain Points  Difficult to connect with public market investors  Increasing shareholder count  Secondary transaction pricing may create unwanted price point  CFO and GC divert time to secondary trading  Legal expense to manage secondary trading  use the NPM as an on-ramp to their IPO – optimizing the transition to public markets Selling shareholders may depress price on expiration of lock up  PRE-IPO COMPANIES Stock plan administration and other systems need greater sophistication 18 CONFIDENTIAL
  • 19. Permanently Private Company Pain Points  Employee stock options worthless without liquidity  Recruiting without stock options difficult  Acquisitions for stock not feasible without liquidity  Early investors pushing for suboptimal exit  Secondary transactions cumbersome to manage  Legal expense to manage secondary transactions  CFO and GC divert time to secondary transactions PERMANENTLY PRIVATE COMPANIES use NPM to gain compliant, efficient liquidity 19 CONFIDENTIAL
  • 20. Benefits of listing on NASDAQ OMX 20 CONFIDENTIAL
  • 21. NASDAQ is home to INNOVATORS & VISIONARIES Home to people and companies like yours, who revolutionize industries and reshape our lives. 21 CONFIDENTIAL
  • 22. Current IPO Trends 2013 Top 10 Tech IPOs Symbol Company Name Exchange Gross Proceeds Market Cap NASDAQ $303,500,000 $4,420,288,925 NYSE $254,200,000 $4,268,151,639 CDW NASDAQ $395,250,000 $3,841,109,798 WSTC NASDAQ $425,500,000 $1,926,222,616 FUEL NASDAQ $116,000,000 $1,813,152,757 SALE NASDAQ $190,909,068 $1,673,900,513 GOGO NASDAQ $187,000,000 $1,581,188,391 NYSE $117,600,000 $1,521,552,903 HAWK NASDAQ $230,000,000 $1,259,451,274 BNFT NASDAQ $130,777,500 $1,221,194,221 FEYE DATA CVT Tableau Software, Inc. Cvent Inc. Source: Factset Research, NASDAQ. US based Technology companies defined by US companies in the GICS Information Technology Sector, Internet Retail Sub Industry and Health Care Technology Sub-Industry. NASDAQ has also classified West Corp. (NASDAQ: WSTC) as a tech IPO although GICS classifies the company under the Industrials sector. For all intents and purposes WSTC is a tech company. IPO Market cap based on data as of 9/20/2013. 22 CONFIDENTIAL