Cashing Out

CASHING OUT THE GREAT SURGE FOR TECH COMPANY EMPLOYEES TO UNLOAD EQUITY IN RECENT MONTHS SOCIAL MEDIA GIANTS SUCH AS FACEBOOK AND GROUPON HAVE SEEN THEIR CURRENT AND FORMER EMPLOYEES BEGIN TO UNLOAD THEIR EQUITY, IS THIS THE BEGINNING OF A MASSIVE TECH COMPANY SELL OUT? SOCIAL MEDIA AND SECONDMARKET THIS NEW UPWARD TREND OF EMPLOYEES AND INVESTORS CASHING OUT IS CLOSELY LINKED TO THE TRADING ACTIVITY ON SECONDMARKET. Q2 2011 INTEREST IN SELLING SOCIAL MEDIA STOCK HAS FAR 39% OUTSTRIPPED INTEREST IN 14% SELLING STOCK IN RETAIL & COMMERCE, GAMING, AND (7.7% (5.5% SOFTWARE. THE INDUSTRY DEMAND FOR THESE STOCKS IS EQUALLY HIGH AS MANY CONSUMER WEB & SOCIAL MEDIA RETAIL & COMMERCE GAMING SOFTWARE SOCIAL MEDIA EMPLOYEES SELL WHAT STOCKS THEY 34% CAN. 6.1% (7.7% 1.6% CONSUMER WEB & SOCIAL MEDIA RETAIL & COMMERCE GAMING SOFTWARE Q4 2010 Q1 2011 WHO IS SELLING THEIR STOCKS ON SECONDMARKET? 100% FROM THE LAST QUARTER OF 2010 TO THE FIRST QUARTER 86% OF 2011 THERE WAS A 22% PERCENT INCREASE IN 80% COMPLETED TRANSACTIONS 64% BY EX-EMPLOYEES. 60% 40% 28% 20% 8% 4% 2% 4% 5% OTHERS EX-EMPLOYEES INVESTORS EX-EMPLOYEES Q4 2010 A MAJORITY OF THOSE 39% COMPLETED TRANSACTIONS CAME FROM FORMER EMPLOYEES OF FACEBOOK. THEY ACCOUNTED FOR 7% 5% NEARLY 40% OF TRANSACTIONS, MORE THAN ANY OTHER SOCIAL NETWORK. FACEBOOK LINKEDIN ETSY CASH OUT COMPANIES COMPANIES THAT ARE FEELING THE BURN ARE ALSO THE SAME ONES THAT WAITED TO GO PUBLIC AND HAVE HUGE VALUATIONS. FACEBOOK 2009 2011 SINCE FACEBOOK'S VALUATION HAS SOARED TO NEARLY $50 BILLION, EMPLOYEES WHO OWN STOCK OPTIONS AND HAVE BEEN DIGITAL SKY TECHNOLOGIES T. ROWE PRICE AT THE COMPANY SINCE ITS EARLY $00 MILLION YEARS ARE EAGER TO PROFIT. SEEING THIS, FACEBOOK HELPED TO BROKER TWO SALES FOR ITS $198 EMPLOYEES. MILLION GROUPON EVEN MORE SO THAN FACEBOOK, GROUPON HAS SEEN NOT ONLY ITS $946 MILLION EARLY EMPLOYEES CASH IN THEIR $810 MILLION STOCKS, BUT THEIR EARLY INVESTORS AND FOUNDERS. THE RAISED FROM INVESTORS IN DECEMBER 2010. WENT TO CHIEF EXECUTIVES COMPANY HAS BEEN QUICKLY INCLUDING ANDREW MASON, ERIC LEFKOFSKY. LOSING MONEY. $120 MILLION ADDITIONAL FUNDS TO CHIEF EXECUTIVES IN APRIL 2010. WHAT IS DRIVING THIS NEW TREND? BELOW ARE A FEW FACTORS THAT COULD BE ENCOURAGING ON EMPLOYEES TO SELL THEIR STOCKS. TAKING THEIR TIME NUMBER OF IPOS ANNUALLY FEWER VENTURE-BACKED STARTUPS ARE GOING PUBLIC 200 AND THOSE THAT D0 THAT ARE, 200 ARE TAKING MUCH LONGER. LENGTH OF TIME TO IPO 160 "Employees have become.more.... interested in selling, in part because companies are taking longer to go public. And workers' eagerness to see tangible reward has promoted the creation of a number of businesses to serve their needs." -Miguel Helft, NYTimes.com 2011... 1999 (47ys. 120 80 63 75 2009 10 yrs. 40*** 1990s 2009 2010 TECH BUBBLE FEARS ONE OF THE KEY DRIVERS FOR THIS STARTUP CASH OUT COMES FROM FEARS OF AN IMMINENT TECH BUBBLE BURST. VERY FACEBOOK SIMILAR TO THE 2000 DOTCOM BUBBLE, MANY OF THESE SOCIAL 2011 VALUATION $75 BILLION MEDIA COMPANIES' VALUES FAR EXCEED THEIR REVENUE. 2010 REVENUE $2 BILLION "Even if I could sell all 20 percent, having 80 percent of your wealth in one illiquid asset is pretty insane. It's not enough to make yourself bulletproof if the world blows up." - Ex-Facebook employee LINKEDIN SKYPE GROUPON 2011 VALUATION 2011 VALUATION 2011 VALUATION $9 BILLION $8.6 BILLION $25 BILLION 2010 REVENUE 2010 REVENUE 2010 REVENUE $243 MILLION $860 MILLION $760 MILLION SOURCES: NYTIMES.COM I SECONDMARKET.COM I SOCIALTIMES.COM I VENTUREBEAT.COM I FINRA.ORG I BUSINESSWEEK.COM I GIGAOM.COM FOCUS INTEREST TO SELL INTEREST TO BUY EMPLOYEES OTHERS EMPLOYEES FOUNDERS