Nasdaq has officially entered the pre-IPO market.
The U.S. stock exchange today launched Nasdaq Private Market, a joint venture with SharesPost that enables private companies to raise capital and manage secondary transactions.
With its private market, Nasdaq has joined the ranks of companies like AngelList, SecondMarket, and Crowdfunder that facilitate private company investments outside the realm of traditional venture capital.
Nasdaq has stricter qualification requirements than most other platforms, however: Companies listed on the Nasdaq private market must have raised at least $30 million in funding in the past two years or have a valuation north of $50 million. These companies also need to be profitable, with at least $750,000 in annual net income.
“Nasdaq Private Market gives entrepreneurs more flexibility in deciding if and when to go public,” Bruce Aust, chair of the Nasdaq Private Market board, said in a statement.
In addition to straight capital raises, the new market serves as another venue where employees can liquidate their company equity. Accredited investors, meanwhile, can get get early shares in companies that don’t necessarily need their (specific) capital.
Nasdaq and SharesPost first announced the private market last March. But this isn’t Nasdaq’s first attempt at running a secondary market for private companies: It launched its BX Venture Market in May 2011 as a marketplace for early-stage companies. Even earlier, in 2007, Nasdaq launched the “Portal Market” as a regulation-free marketplace for unregistered equity securities. Neither effort went very far.
But Nasdaq’s Private Market and other secondary markets are substantially more viable now that companies can have up to 2,000 shareholders before they need to disclose their financials. (The JOBS Act, passed in 2012, quadrupled that limit from 500.)
Nasdaq can also leverage SharesPost’s existing technology and relationships.
Companies that decide to use Nasdaq’s private market may opt to stick with the exchange they know if they decide to go public. Some of major tech companies last year, including Twitter, opted to list on the New York Stock Exchange over Nasdaq for their IPO, probably related to Nasdaq’s unfortunate handling of Facebook’s public offering.