Earlier this week, NASDAQ announced the launch of their own private market to compete with the likes of SharePost and SecondMarket. Earlier today, we’ve learned that NASDAQ is already signing up several HOT startups for their new private market and according to our sources, the first company to announce that it will join this new initiative is Mobli, an Israeli mobile-social photo and video sharing startup.
Private exchanges are the hottest thing in town
The term private exchange or private market might be a bit confusing for those who are unfamiliar. The idea behind such market is to allow early investors, founders and early employees sell their shares while keeping close tabs on who can buy and sell shares, how many shares can be sold at any given time, and the timing of such transactions.
These exchanges allow private companies to raise capital from a broader number of investors beyond those traditional VC firms. However, these exchanges still require one to be a qualified investor (mostly by US standards, but some of those already have applied international regulations).
On the other hand, if a company wants to join a secondary market such as NASDAQ private market, it needs to have raised at least $30 million in venture captial or other types of private funding over the past two years or have to be valuated at least $50 million in enterprise value. Another requirement is that they must be profitable, with at least $750,000 in net income.
Private exchanges are also a ground for companies that may be thinking of conducting an IPO. NASDAQ has said that its private market could allow companies to test the water before selling their shares on the public market. Should companies sell shares privately with NASDAQ, they may be more likely to stick with NASDAQ upon an IPO. (NASDAQ lately has not been the first choice for social media companies’ IPOs due to the mishaps with Facebook’s IPO in 2012.)
The secondary/private stock exchange scene is getting hotter and hotter these past few months. With the likes of AngelList, Funders Club, WeFunder and Equidate joining the party and now the NASDAQ private exchange, the road for raising capital is becoming shorter and shorter.
Is this an “All-in” or a “want out” move?
For mobli, joining the NASDAQ private exchange would seem like a wise move. This Israeli startup has recently drawn a lot of media attention with their announcement of a $60 million funding round led by Carlos Slim in November. Prior to that round, the company raised more than $28M from Kazakh businessman Kenges Rakishev and some very familiar names such as Leonardo Dicaprio, Tobey Maguire, Lance Armstrong and Serena Williams.
This move will allow both investors and founders, running the company for the past 4 years or so to liquidate some of their investments in the company, while allowing the company to keep raising more money to grow the company. In a previous interview with Geektime, Moshe Hogeg, Mobli’s Founder and CEO, explained that he believes that everyone should have the ability to become part of something big. According to Hogeg, the NASDAQ Private Market will enable Mobli to provide further benefits to its stockholders and to increase their liquidation alternatives.
Founded in 2011, Mobli is a picture and video sharing application. As of November, it has 12 million users worldwide.
But while the company has managed to grow its userbase quite a bit in the last few months, especially thanks to a push from Slim’s América Móvil to bring Mobli to Latin America, the ultimate question still remains; will Mobli finally take off to a degree that justifies its investment, or will Slim, Rakishev and DiCaprio wake up one day and wonder what just happened to their $90M? If that question ever does come up, I think DiCaprio himself put it best when he said, “Dreams feel real while we’re in them. It’s only when we wake up that we realize something was strange.” Inception