/// VCs Pay Up for Second(ary) Chance to Invest in Web Winners [NetworkEffect]

February 15, 2011  |  All Things Digital


Silicon Valley’s top venture capital firms pride themselves on finding future hits before anyone else. That’s how they get the best returns, have the most influence and build their brands. But the current market tempts VCs to change the game plan by buying shares of late-stage Web companies wherever they can find them–from start-ups directly or from employees and previous investors. VCs didn’t start the fire; folks like Yuri Milner from Digital Sky Technologies (Facebook, Zynga, Groupon), and private company marketplaces that help stave off IPOs, like SecondMarket and SharesPost, did. But these new Web giants’ valuations just keep going up. Think Facebook’s valuation was bloated at $50 billion ? After seeing huge demand at that price, a month later, the company is exploring selling employee shares at a $60 billion valuation. Watching those numbers rise so quickly makes VCs lose their hang-ups about price and just want to get in on the hotness. Kleiner Perkins is reportedly buying $38 million worth of Facebook shares from existing shareholders at a $52 billion valuation, according to VentureWire . Meanwhile, Andreessen Horowitz bought $80 million worth of Twitter shares on the secondary market, after not participating in the company’s recent $200 million funding round , lead by Kleiner Perkins. Both those firms, along with Battery Ventures and Greylock Partners, also invested in Groupon’s last huge round , after the daily deal site walked away from talks of a $6 billion buyout by Google . It’s not just the big names doing such deals. Venture capitalists were the buyers in more than 40 percent of transactions on SecondMarket in the fourth quarter of 2011 . VC activity easily outpaced other buyers, which were individuals, hedge funds, mutual funds, secondary funds and asset managers. According to SecondMarket Head of Public Affairs Mark Murphy, VCs representing the largest percentage of buyers is a recent trend that started in the third quarter of 2010. This comes at a time when raising money for a VC firm is tougher than ever . What are VCs buying on SecondMarket

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VCs Pay Up for Second(ary) Chance to Invest in Web Winners [NetworkEffect]



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