Entrepreneurs Wary of IPOs: SecondMarket CEO
Entrepreneurs no longer view taking their company public as the pinnacle of success and many would rather stay private, Barry Silbert, founder and chief executive of SecondMarket, told CNBC's "Squawk on the Street" on Tuesday.
"If you look at the number of IPOs that are happening today versus the number in the 1980s and 1990s, we're down 50, 60, 70 percent," Silbert said. "Entrepreneurs don't want to go public, they can't go public. A really big gap has formed in the whole capital formation process that something has to come in and fill."
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Silbert pointed to the Facebook IPO last spring as the peak in the market given the high expectations both from a valuation and price performance perspective for the stock. Facebook shares are down nearly a quarter since its public debut, and recently was trading under $29 a share.
Other tech stars have gone public only to see their fortunes stumble. "It's left a bad taste in the mouth of a lot of entrepreneurs who don't want to follow the path of a Facebook, Zynga and Groupon and have their stock decimated on the public market," he said.
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SecondMarket is a private market that allows companies to decide who is allowed to buy and sell shares and when. That filter has allowed companies to delay an IPO until they're more mature, and can handle the demands of a public listing, Silbert said.
It counts Good, Meraki, Codecademy and Kiip as some of the companies that its market participants are watching closely.
"Obviously the public markets in the U.S. are the deepest pool of liquidity in the world and it's the best place in the world to get a great valuation," he said, "but all the negative aspects of it leave a lot of entrepreneurs saying I don't want to go down that path, give me an alternative and I'll stay private."
Correction: An earlier version of this story stated that Good, Meraki, Codecademy and Kiip were private companies listed on SecondMarket. Those companies are on SecondMarket's rising stars list, which does not indicate whether or not a company is currently involved in any transactions on the platform.