The problems with this type of "exchange" are as follows:
- There is little data and liquidity to "price" these companies. SecondMarket and the other markets like that had this issue as well. Everyone is interested in Facebook and Groupon when private. After that, nobody knows or cares. And the interest is based on popularity - not on fundamentals of companies.
- The audience for this type of thing is relatively small - startup enthusiasts, startups themselves and maybe VCs. It's not like Hollywood where virtually anyone has an opinion.
I agree that it would be practically impossible to work out how much the companies are worth by traditional investor metrics, discounted cashflow for example. But what about other metrics - user signups, number of times tweeted, number of followers on twitter, number of uniques on site, number of mentions in articles/ posts online...
I believe http://appdaq.net/ used some of these ideas.
Really like ChuckMcM's acquihire/deadpool idea.
Dwolla is too good for my 75k? Good for them. Companies like BofA, Walmart, GE, and literally thousands of other companies would love to take that money and put it to use. Only in the upside down world of SV would you have to be somebody to have your investment accepted.
As far as the prediction market, it would be useless with play money. Skin in the game is what drives efficiency.
When companies raise money, they only raise a given amount. This is true from seed rounds through IPO and subsequent stock issuance. If people want to buy more shares than the company's issuing, some of them won't get shares (and raising the price of equity isn't always the correct answer, especially for an early stage startup).
That being said, I don't have to deal with salary caps and a bazillion other complications when I play Fantasy Football. And this looks like fun! Thanks for posting Sohail.
* Company is raising now * You can get in on the deal * Terms are acceptable * You want to invest in the company
These are some reasons why professional investors are so busy taking meetings, and why so many angels piggyback on deals with more active/well known investors.
I'm looking forward to keeping the list updated and looking back in a couple years.
edit: Apparently we are. Wow.
My suggestion is that you set up a prediction market, with play money of course, where you buy shares on a prediction, so "Foo - Acquihire" yes/no, "Foo - IPO" yes/no, "Foo - Acquistion" yes/no, and "Foo - Deadpool" yes/no. Maybe even lesser bets like "Seed", "Series A/B/C/D/E". You get the value of the shares if your prediction occurs, you get 0 if your prediction does not come true.
With enough participation I expect that could get a bit dangerous (actually moving the market) but its easier than my other idea which is take the stats for every known founder, engineer, marketer, Etc and create actual fantasy startups and have those fly or die based on events that the real people they are based on are seeing.
If I had 100k/yr to invest in startups (which would mean investing $1mm/yr to have a decently safe allocation, unless I had $100mm in existing safe assets), it that's either 1-4 small angel investments per year, or somehow buying an index fund of startups. The only index fund I'd want is one which inherently included all startups, not just the ones which chose to be part of the index, so it would have to be YC VC or something like that. As far as I know, neither of the YC companies doing investment markets could offer that at the current time.
The only way for 1-4 small $25-100k angel investments to be meaningful would be to add a lot of additional value, or to already know the founders really well. So, I guess I could do infrastructure, or gov/intel, or security. Of the public YC companies this batch, only 3-6 really fall into that category.
You'll come out ahead!
