Instagram: Conference Call and Deck

In the wake of Facebook’s acquisition of Instagram, Lou Kerner recently hosted a conference call and published a new deck profiling the deal. Robert Scoble, Peter Relan and Vic Singh (whose slides are below), participated in the call.

To listen to a replay of the call, dial 888-632-8973, or 585-295-6791 (if outside the U.S.), The replay code is 599-456-76#

General Questions & Considerations of a Secondary Market Transaction

Guest Post by Mitchell C. Littman, Esq.

 

 

So, what is a Secondary Market Transaction?

A Secondary Market Transaction is a negotiated private sale of restricted securities of an Issuer whose securities are not publicly traded. Some transactions are effected directly from Seller to Buyer and in some instances one or both parties may be represented by a broker-dealer who may earn a commission on the transaction.

Who are the Issuers?

The Issuers that have attracted the most market attention have been social networking and technology firms that have chosen to remain private but that have (i) used equity and equity-linked reward systems in attracting and incentivizing employees and (ii) received private equity or venture capital investments from some combination of angels and institutional investors.

Who are the Sellers?

The overwhelming majority of Sellers have been founders or early-stage employees that have left the employ of the Issuer, though there has been some selling by early stage investors (primarily angels, rather than VCs who have tended to participate in follow-on rounds). Ex-employees have typically obtained their Shares through the exercise of stock options or by receipt of restricted stock grants.

What securities are they selling?

Most sales are of Common Stock, though there have been some sales of Preferred Stock. Some Issuers have two classes of Common Stock – a class with super-voting rights and a plain vanilla class of Common Stock. In such cases, the vanilla class is invariably the security being sold. All such shares are typically deemed to be ‘restricted securities’ under applicable Federal and state securities laws.

Additional Hurdles to Effecting a Purchase and Sale: ROFR’s and Co-Sale Rights

In addition to the outright prohibition on Transfers, most Restricted Stock Purchase Agreements or Option Exercise Agreements include provisions granting a “Right of First Refusal” (a “ROFR”) under which the Issuer (or its designee), within a prescribed period of time after receipt of a Transfer Notice, may elect to purchase the Shares on substantially the same terms as those proposed in the Transfer Notice.

In some instances, particularly where the Shares to be transferred consist of Preferred Stock, other early stage investors in the Issuer may also have ROFR’s and/or Co-Sale rights entitling them to also sell Shares along with the Seller.

The exercise of any of these rights by the Issuer or another stockholder effectively derails the purchase by the Buyer.

Virtually all ROFR and Co-Sale provisions provide that, in the event the rights are NOT exercised, the Seller has a fixed number of days in which to complete the Transfer to the Buyer. In the event the transaction is not completed within the allotted time, any subsequent attempt at Transfer must once again pass through the ROFR and/or Co-Sale process.

Effecting the Purchase and Sale: The Stock Transfer Agreement

The core document for effecting the purchase and sale of the Shares is the “Stock Transfer Agreement” (also sometimes called a “Stock Purchase Agreement”) (the “STA”).

The typical STA contains:
• The principal terms of the sale, i.e., number of Shares to be sold, price and the like
• Representations and warranties of the Seller include Title to Shares; Absence of any lien or encumbrance; Power and authority to sell.
• Representations, warranties and covenants of Buyer include Power and authority; Sale was not effected through any public advertising or general solicitation; Buyer is taking for investment intent; Buyer is sophisticated and has sufficient access to information
• Buyer absolves Seller for any liability due to the fact that Seller may have superior information regarding the Issuer Buyer agrees to be bound by same restrictions as were applicable to the Shares in the hands of the Seller

Closing Mechanics

Assuming the ROFR is not exercised, the parties may proceed to a closing. Generally speaking, the Seller and Buyer execute and deliver the STA to the Issuer for its approval.

Seller delivers Stock Certificates to the Issuer or its Transfer Agent.
(Some Issuers actually require that all Stock Certificates be held in escrow by Issuer’s counsel to facilitate transfer in the event of a ROFR exercise. In that case, the other parties will only receive photocopies of the certificates.)

Once approved, a virtual closing is conducted, with the Purchase Price being wired by the Buyer to the Seller and the STA signatures and the opinion of Seller’s counsel being released to the parties. Subsequently, the Issuer issues a new Stock Certificate in the name of the Buyer.

About Mitchell C. Littman, Esq.

Mitchell Littman is a founding partner of Littman Krooks LLP and heads the firm’s corporate and securities department. His practice includes public and private offerings, broker-dealer and investment banking matters, secondary market transactions, venture and private equity capital investments and mergers and acquisitions

About Wedbush Securities Private Shares Group
The Private Shares Group of Wedbush Securities covers the growing base of privately traded securities, with an emphasis on those in the social media space. The mandate of the group is to build our trading network in all private shares, source deal flow in the space (including “initial private offerings”), and to build funds and create other alternative investment opportunities across private shares for our institutional and accredited retail clients.

FRANK MEEHAN – CEO, INQ

The maker of the soon to be released Facebook phone.

INQ, a fully owned subsidiary of Hutchison Whampoa, was founded in 2008 by Frank Meehan, who was previously General Manager of 3G Handsets and Applications for Hutchison Whampoa. INQ is backed by Li Ka-shing who is Chairman of Hutchison Whampoa and is also an investor in Facebook and Spotify. Last Tuesday, I had the pleasure of spending an hour with Frank Meehan, CEO of INQ, to discuss the first Facebook branded phone.


In addition to getting a lesson on China (e.g. Chinese tech companies are built to scale, U.S. companies are largely built to flip), thoughtful insight in to the social ecosystem (Frank also sits on the Board of Spotify among others), I got a personal preview of the phone, which is set to debut in the first week of April in the UK with Carphone.

A few things are important to note:

- Hutchinson’s major shareholder is also a shareholder in Facebook, so the phone had significant input from Facebook.

- INQ is a software company, so the company is well positioned to continually iterate the phone.

- The phone operates on the Android platform.

- The phone is incredibly sleek, but it’s the functionality that impresses the most. To those whose lives are centered around Facebook and their friends, I believe that the phone will be extremely popular. It’s simply optimized for the experience of interacting over Facebook. The phone learns who your closest friends are, and optimizes the experience to provide that content in a very compelling (iPad-like) format.

Scott Rafer Declined an Interview With SecondShares – says “No Insult Intended”

I had a conversation with Scott Rafer on Skype Sunday night, where I requested a video interview of him on SecondShares so he could express his views on the secondary sale of private company stock in companies like Facebook, Twitter and Zynga, as well as the recent angel investment “bubble”. Scott declined to be interviewed by SecondShares, expressing his concern that we are “legitimizing” the private secondary shares market, which he feels strongly against.

Apparently there appears to be a growing sentiment among a select few within the startup community that the secondary markets should be avoided like the plague.  This post is in response to a post written by Scott attacking us (but not naming us) and the secondary market for private company stocks, and is intended to clarify our mission and the value of the secondary market for private company stock, since its apparently not yet clear to some rather influential and smart individuals within the startup community like Scott.

Interestingly, after our ten minute conversation on Skype, Scott responded by writing a blog post that started with “There’s No Insult Intended…”, yet in his blog post he said:

“…as is clear, Google is forever. I’m not going to voluntarily have my name indexed alongside his domain.”

SecondShares hopes to provide a platform for all parties to articulate their views on the secondary market for private company stock, and we had hoped Scott would accept our invitation to participate and provide his views.

In Scott’s post he incorrectly described SecondShares as:

“His blog covers solely the market for private stock sales. He only succeeds if it becomes a legitimate market. I am very concerned that we’re just seeing the start of a giant wave of these crappy deals and that they will total many billions of dollars in the coming years. His domain, his logo, and 90% of the articles on the site are legitimizers of this poorly considered macro reaction to the over-regulated mess we call the IPO process.”

Scott is either misinformed or unaware, but to clarify, SecondShares provides news, commentary, and Wall Street style analysis on private internet companies.  We do not solely exist to report on private stock sales of internet companies.  In fact, we don’t even know when the second market transactions occur.

Scott states that his concern is to not “legitimize” the secondary market, however, he addresses it on his blog. The reality of this emerging market is that Scott and many others ought to act to legitimize this market whether it be on our SecondShares site or not.

The public market’s decade long bear market burn of value in the US public equity market needs a new way to channel value creation because a chart of the S&P over the last decade demonstrates that the US public equity market is broken!

History has demonstrated that the birth of many markets has been marked by a chorus of discrediting and undermining commentary by many including the entrenched players at risk.  The case in point today is the secondary sale of private company stock, also known as the second market.  Some, like Scott, within the startup community are articulating their concerns.

“I’m concerned about the inevitable ripoff artists who will start shell companies solely to sell their shares on SecondMarket (or wherever). They’ll have documented some silly plan about rolling up small social game publishers, Groupon clones, or whatnot.”

Before one casts further dispersions on other legitimate business approaches and strategies such as rollups of synergistic businesses one ought to consult with one of the many wildly successful business managers greats such as Jack Welch formerly of General Electric that was noted for building one of the greatest companies in the world with such a roll up strategy, or the highly successful internet entrepreneur Richard Rosenblatt of Demand Media or even Mark Pincus of Zynga (which has rolled up quite a few application companies.) The list goes on and on.

Given the precarious state of the world’s public equity markets it is quite concerning to us that so many within the startup community are seeking to cast dispersion on a market that is so strategically critical in today’s financial environment and possibly for many years to come.

Though Scott’s contrary logic still evades us, we are the preeminent blog for thoughtful commentary and analysis surrounding private internet companies by acknowledged, seasoned and successful Wall Street professionals.

More ironic is the idea that Scott apparently believes that there can be any legitimate market that can steadfastly avoid the “crappy deals” and “inevitable ripoff artists” that he speaks of in such a way as to believe that they only exist in the realm of a market like the secondary market.

One might consider recent events such as Bernie Madoff’s escapades, pink sheet shell company scams as well as countless public stock manipulations before relegating such activities to the realm of a new market such as the one SecondShares expounds upon. Importantly, it is worthy to note that insult is added to injury in that the public market’s crimes count as its victims those that are not accredited investors, while the inevitable incidents that may occur in the secondary sale of private company stocks do not! Scott’s concerns would be much better placed on a public market of tens of trillions of dollars, rather than the emerging legitimate and the strategically critical secondary market.

While Scott may scoff at the notion of this market being a strategically critical market, the ultimate irony is that the private market that Scott fears to “legitimize” has been his personal choice of venue establishing the value of his companies!  While Scott may say he raised capital and sold equity to “professional investors” (angel investors and venture capitalists) the fact of the matter is that markets have a history of broadening out and the accredited investor qualification of the secondary sale of private equity offers a protection that the public equity markets do not offer. In the end, as we all know, the world is getting flatter and to pretend there isn’t more business intelligence more firmly planted more broadly than it ever was before is to believe the realities of why the second market has the credibility and traction that it does. This is why SecondShares was established to create a reasoned voice of commentary and analysis in a market that is destined to grow in its importance and consequence. Again, we would say that Scott’s concerns would be better placed on a much larger market with less protections around the unsophisticated investors involved in investing in the US public equity markets.

To keep things very simple, in a bear market the gravitational pull of the market is such that it is directed at pulling down the value of publicly traded stocks. Importantly, we believe there is a growing trend to consider that the use of stock to attract and retain key employees as well as the use of a stock based currency to acquire strategically critical assets is mission critical and best not left to chance valuation in a bear market.

The only irony greater than where Scott chooses to blog his views on the secondary market is that he would suggest to others that they leave the critical strategic imperative of how a stock gets valued to be relegated to the whim of a public bear market rather than to an orderly, governmentally blessed and legitimate second market. It’s not likely an accident that there is more value today than ever before being captured in the companies that make up the secondary market.

Perhaps it’s not a mere oversight on the part of all these non-public companies with values in aggregate well north of one hundred billion dollars. We just doubt that that they simply forget how to file an S-4 with the SEC to go public. Ask any of the countless investment bankers chasing Facebook and the many other companies that would be gladly be shown the rubber chicken laced road shows required to go public. They are clearly choosing not to go public. There is a lesson in this for many that think that the road of running a successful company must go through the IPO door.

The strategic imperative of thoughtfully considering how a Board and a management team chooses to have their company valued may in fact best be left to a market that they can believe in; rather than a public equity market noted of late by the SEC for the largest insider trading scandal ever in history and is looking more and more like Japan’s death defying bear market of the past twenty years.

We guess the punchline is …

We were insulted!  ;)

This post was edited in collaboration between Jay Gould & Bill Auslander.

The Dot Com Bubble Is Back – Fred Wilson and John Doerr Discuss

With 10%+ unemployment, it’s hard for most American’s to imagine, but the dot com bubble is back again. According to many, we are seeing a bubble yet again surrounding internet companies at historic proportions in early stage and late stage investing.

The reality is that there has been a lot of wealthy individuals with their cash sitting on the sidelines since the great recession began in late 2008, and they’re trying to figure out where they can yield the highest returns. With historically low interest rates, declining real estate, and the uncertainty of the public markets, they have been fleeing to invest in private companies, creating an over supply of capital to a limited number of rapidly growing startups. The result may very well have created yet another dot com bubble, so they say.

Yesterday at the Web 2.0 Summit in San Francisco, the prominent NYC based blogger and Union Square’s early stage investor Fred Wilson and the iconic venture capitalist from Kleiner Perkins Caufield & Byers, ranked 582nd richest person in the world by Forbes, John Doerr, took the stage to square off and discuss, among other things, whether we’re in a bubble (or boom) within early stage investing and the secondary markets.

Fred Wilson explained that he feels the current seed stage investing environment is “getting overheated, people are getting crazy, they’re showing up to their first meetings with term sheets.” According to Wilson, he’s seeing two to three person teams receiving $30, $40, $50 million dollar valuations on their first rounds, and as he puts it, “I think that’s not right”.

John Doerr responded by saying “I think what Fred’s describing in terms of the valuation, for sure is right.” But Doerr went on to explain that he feels the times we’re in right now as unusual and exciting, and that “entrepreneurs are better, ideas are better, and the markets are larger.” Doerr closed with “I prefer to think of these bubbles as booms, and every boom, I think booms are good, booms lead to over investment, booms lead to full employment, booms lead to lots of innovation. You know there was a boom when they started railroads, we’re in another bubble or boom and its an exciting time right now.”

Fred followed up by clarifying that although he feels we are in a bubble right now, its great or everyone other than the angel investors “because the now can’t get into deals they used to get into. There’s too much money, and it used to be when you syndicate angel deals everybody could get in cause everybody’s writing a $50k or a $100k check, if its a $1 million round they could all get in, but now there’s many of them that can’t get in.” Fred described that its not good for angels, but that its great for entrepreneurs and traditional venture capitalists because more companies are getting funded so there’s more opportunities for “us to invest”.

Considering Union Square is an early stage investor, one has to wonder if there now seeing pricing pressure on these deals, if Fred is expressing frustration from their own experiences. John Doerr on the other hand is a late stage investor, so you’d have to wonder if he’s feeling some pricing pressure with the DST’s of the world in the secondary market offering growth stage companies more favorable terms and valuations.

To that point, a person from the audience asked the two investors whether they feel the prices we’re seeing in the secondary markets for Facebook, Zynga and Twitter stocks are bubblish and overpriced, and Doerr suggested to buy more now, stating:

“I turn to Mary Meeker, a long time friend, and I think the best of how these are gonna be valued in either an acquisition or a public market, and remember what she said on stage earlier. These are MONSTER markets, she has a better track record at picking ten baggers, and I mean ten times appreciation AFTER companies are public than anybody in the world. I think, yeah, she would tell us to invest a lot of money in a Twitter or a Facebook at valuations at around ones that are in these secondary markets today.”

Social Gaming Says Good Riddance To The Month Of May

Facebook’s changes in notifications and requests, which eliminated a significant amount of free advertising enjoyed by social gaming applications, had a major negative impact on Zynga and most of the other major social gaming companies driving large losses in Monthly Active Users (MAUs) in May:  :

The only one of the big four to eke out a gain in May was Playdom, due to the rise of the soccer team application Bola and the village building game Treetopia.   Zynga lost more than 10% of their gamer base as every single one of Zynga’s major titles lost players in May:

The MAU loss for Treasure Isle was particularly surprising given the games massive growth in April, during which Treasure Isle added 25 million MAUs.  The rapid raise and subsequent decline highlights the compressed life cycle of games on the Facebook platform  Where Farmville took about 9.5 months from start to peak, Treasure Isle appeared to peak less than 2 months after its introduction.  That trend does not portend well for monetization of social games on Facebook, as game players tend to spend more money on virtual goods after they have established a presence in a game.

The$64,000 question s how long the decline will continue for the social gaming sector on Facebook?  If we look at the pace of decline, it accelerated the first few weeks of May, and seems to have leveled off at a 2.4% weekly decline the last few weeks.  That number will eventually recede as the loyal gamers who are less dependent on notifications and requests will become larger percentages of the remaining gamers pool.  However, the coming summer months are the seasonally slow for gaming of all types.  So it appears likely the declines will continue through June.

Given the changes at Facebook, we believe that growth for Zynga and the other social gaming companies will increasingly come from platforms other than Facebook.  Zynga’s recent partnership with Yahoo brings a new platform to potentially drive growth.  In addition, Zynga’s own sites, including Farmville.com (the 382nd most trafficked site on the net according to Alexa.com) and the stealth, thought much anticipated Zynga Live portal, bring hope for renewed growth.

However, until these new initiatives are able to take root for Zynga and other game developers, we anticipate the dog days of summer will not be kind to social gaming companies.

Lots of Obstacles Remain For Secondary Market

Listening to last weeks webinar by SecondMarket.com really highlighted all the obstacles that remain to the emergence of a vibrant  secondary market for private shares.  A market exists, and it’s growing nicely, as evidenced by the 20%+ monthly growth in transactions on the SecondMarket.com platform this year:

However, to put SecondMarket’s monthly volume in perspective, Google trades$70mm worth of shares  every 15 minutes of every trading day.  While the growth is impressive, it’s off a miniscule base.

SecondMarket set up the call to dispel myths that surround the secondary market.  To address the issues in as unbiased a fashion as possible, the webinar consisted of a panel of “experts” including Keith Rabois from Slide, who has traded shares on the SecondMarket platform; Sujay Jaswa from the VC firm NEA, and Chip Lion from the law firm Morrison & Forester.  The panelists were joined by SecondMarket CEO Barry Silbert.

The first issue addressed by the panel was why the markets exists to begin with.  The most basic answer was to give liquidity to founders, investors an employees who are involved with companies that are experiencing elongated exit periods.  The accompanying chart provided by SecondMarket shows that the average IPO now takes 10 years compared to just five years five years ago.  In that environment, the secondary market solves the liquidity issue faced by all the players in the ecosystem.

The secondary market decreases pressure on companies to exit as it enables the companies to address the liquidity issues that exist.  Yelp was cited as an example fo a company that had partaken in the secondary market to “stay private a little longer”.    In addition, staying private is becoming a more attractive options than going public given the financial and management burdens associated with Sarbanes-Oxley.

Understanding why the market exists is easy.  Understanding why the market is still so small starts to address some complicated issues.  The lawyer on the panel, Chip Lion, made a valiant effort to address the legal issues, but the complexity is daunting.

Under Section 5 of securities act of 1933, in order to be traded, securities need to be registered, UNLESS there is an exemption.  There are two common exemptions in the secondary market, Rule 144 (and 144A), and Rule 4- 1 1/2.  Both rules address a long list of issues including how long the securities need to be held before being re-traded, exclusions for “insiders”, the sophistication of the investors, and the information required of the company to provide upon request.  If you click on any of the links above, you’ll get a sense for the complexities.

In addition to the regulatory legal issues, there are legal issues as a result of the terms set forth in the companies financing documents.  Most VC backed companies terms include a “Right of First Refusal” or “ROFR” that needs to be waived or given the time to expire.  There are also often co-sale agreements giving the other shareholders the right to sell shares to the acquirer.  As time is the enemy of any deal, these terms cause friction in the market.

Silbert highlighted how SecondMarket has a 15 person department to comply with all the rules.

The daunting legal issues are coupled with a current marketplace where companies look wearily on private market transactions.  Company fears highlighted by the panel included:

  1. Employee De-Motivation – If employees monetize their wealth, there is a fear they will be less motivated to drive the company’s performance.  .
  2. Spread between options value and preferred shares – If a secondary market transaction place a fair market value that is higher than the Board has set, it could increase the price at which new options can be granted and deter an company’s ability to raw top talent.
  3. Confidentiality – A new shareholder could demand to see financial information the company would prefer not to disclose.
  4. The Rule of 500 – If a company has over 500 shareholders, they are required to file information as if they were public.

Some companies, including Facebook, have reportedly already limited employees ability to sell shares unless “a window opens”.   Interestingly, restricting current employees’ ability to sell creates the incentive to leave a company, as ex-employees often have far greater flexibility.

SecondMarket believes that these issues can be addressed by having more of a “structured” marketplace, where companies identify one broker (e.g. SecondMarket), who can address all the legal issues and help structure liquidity programs that meet the needs of all the different parties (most notably the companies).  While that may address many of the companies concerns, it seems to us to put other constraints on the market.  Having a company force a broker on both a buyer and seller isn’t how the public market works, as parties want to choose their own brokers.  So by definition, a closed system will decrease the price received by the sellers at it decreases the pool of potential buyers.  Also, a closed market just doesn’t smell right.  But if it does address the concerns of the companies, and if the companies are the gating factor to growing the market, maybe it is the best path to grow the market?

At the end of the day, we believe the market is best served by being as open as possible.  For employees struggling to make ends meet, it’s a tough pill to swallow to be told by your company that you can’t sell share or you have to sell them in a window or in a closed system that will decrease the prices.  I think enlightened companies that give their employees the most freedom will emerge, all else being equal, as the preferred places to work.   In fact, companies should embrace the secondary market as a way to increase employee happiness and retention.   One company we’re familiar with is planning to let their employees sell their shares, but the proceeds will be put in escrow and be drawn on by the employees on a monthly basis over four years.  Guess what, the employees are going to be thrilled, as it will meaningfully increase their monthly take home.  Both retention and productivity are sure to increase.  Finally, the company will also ask the employees to defer raises for four years, as in effect, they will be receiving very meaningful pay increases through the stock sales.  Lower costs are great for all shareholders.  Sounds like a great win/win/win.

That genie is clearly out of the bottle, as employees are increasingly aware of the secondary markets available for selling their shares.  Companies should embrace the genie, not try to stuff it back in the bottle.   Interestingly, SecondMarket mentioned on the call that they will be leveraging the secondary market to provide liquidity for their employees.  Maybe they can be the poster child they’ve been searching for?

Zynga and Facebook At War?

While Facebook and Zynga should be the best of friends, as their relationship has been massively mutually beneficial, business relationships are like marriages, unless each party is willing to give 70%, they don’t always work out.  In this case, Facebook has ratcheted down the different channels Zynga historically used to advertise freely to the Facebook audience, forcing Zynga to spend more on advertising.  Those moves, coupled with the introduction of Facebook Credits and its fat 30% fees (i.e. tax) on Zynga’s virtual good purchases, has forced Zynga to aggressively seek alternatives to the Facebook platform, including sites like its Farmville.com.  Now TechCrunch reports that the ill will is reaching a boiling point and Zynga’s CEO is telling his troops that a break with Facebook may be coming.  Before Zynga gets a divorce from Facebook, I suggest they seek counseling or try and mediate their differences as both parties have a lot to lose in a split.  We’ll keep you posted.

Fred Wilson Supports Secondary Market For Private Company Stock Liquidity

Today Fred Wilson wrote about the nearly 1,000 point “Crash of 2:45PM” yesterday, and in his post he described the public markets as a fickle thing.  He went on to say:

“I believe the secondary market where institutional private capital comes into the cap tables of startups and provides liquidity to founders, angels, and early stage investors is the next big thing for liquidity in the startup business and I am pleased to see that market continue to develop nicely.”

Fred has been a long time proponent of the secondary markets, he’s said on a number of occasions that he feels we need a more active secondary market for founder shares and shares purchased on early investors in venture backed companies.  We obviously agree with Fred, and we’re happy to see him continuing to speak positively about the secondary market as a liquidity option!

NY Tech Scene Is Heating Up

Last month, NY based early stage VC  Roger Ehrenberg wrote a compelling blog post about the steps the NYC Venture scene could take to increase its relevance.  While I agree with most of his comments, my experiences over the last few weeks at both the NY Angels and the NY Tech Meet Up highlights to me how increasingly vibrant and relevant the NY Tech scene has become.

I hadn’t been to a NY Angel event in six years, but on the urging of internet exec turned angle Geoff Judge, I decided to give it another shot, even though the three hour commitment made me pause.   I got there (PWC’s beautiful new building at 42nd and Madison) for coffee at 8am to at least do some networking, and the room was already filled with 25 angels and company execs.  I was immediately struck by the buzz in the room.  The angels were excited to be there as were the presenting companies.  And the people kept streaming in.  When I introduced myself to the Executive Director, Paul Sciabica , and described what we were doing at SecondShares, he immediately asked if I knew Barry Silber, CEO of Second Market.  I’ve met others at SecondMarket, but had yet to meet Barry.  So I walked over and introduced myself and had a nice conversation.  For me, even if the rest of the time was a bust, attending the meeting was already time well spent.

By the time the official program started promptly at 8:30a.m., the conference room was overflowing with about 60 people.  The crowd included 12 women, which is eleven more than I remember ever attending one of my earlier NY Angel meetings, and a much higher percentage than is represented in traditional VC land.  The meeting starts with uber angel, and NY Angel President David Rose asking everyone to introduce themselves.  It was an impressive group. Ten minutes down, 170 to go.  David than gave an update on the four deals in process of closing financings.  That seemed like an impressive number to me and not much different than the total closed by the group in all of 2009.  David then highlighted how the NY tech community “has come roaring back out of the recession” and is more active than ever, highlighted by all the tech related events in New York referenced in garysguide.  David also spoke of the new angel groups in town, including GoldenSeeds , Keiretsu,  OpenAngelForum (Calacanis’s national effort with the NY group run by  Charlie Odonnell at First Round Capital).  Lastly David mentioned the NYU Business Plan Competition as another indication of the city’s booming start up culture.

Liddy Karter, a VC, who is also active with the aational angel association, the ACA, then discussed the regulatory environment for angel investing.  She was happy to tell the group that the Dodd Bill which originally included a number of debilitating new rules for angel investing, was now looking more favorable for angels, with the only negative new rule likely to be the exclusion of one’s house when measuring one’s wealth and thus appropriateness for angel investing.

It was finally time to watch the company presentations, and there were some great ones.  Most notable were SeatGeeks which aggregates the sellers in the secondary market for sports and concert tickets (e.g. Stubhub), and provides a comprehensive look at each ticket as well as a forecast of which way the ticket prices for an individual event are headed.  It’s Farecast for sports and concert tickets. We’ve got a grainy short Skype SecondShares interview with CEO Jack Groetzinger.

I was also impressed by Spyderlynk which provides brands with interactive logos.  Check out their site, they’re getting traction with major brands like Coke and Coors.   Bottom line, all five of the presenting companies were interesting, and they all had follow up interest from the participating angels.

The NY Tech Meetup I attended on May 4th was also an eye opener.  While the event has been selling out its 700 tickets for some time, the quality of the presenting companies and the announcements made all reflected extraordinarily well on the NY Tech community.  Most notable of the announcements was the new partnership between NYU’s Berkley Center For Entrepreneurial Studies and Innovation and NY Tech Meetup.  One of Roger Ehrenberg’s ’s points was that the area schools need to get serious about entrepreneurship, and this is a major step in the right direction, as it will create a closer tie between one of the city’s major educational institution and one of NYC’s major start up communities.

Among the impressive companies presenting at NY Tech Meet Up this month was URL shortner Bit.ly, which said they are now shortening 50mm URLs a day, and have passed 2 billion in total.  The data business to grow out of that has enormous potential.  I was personally blown away by Zoomino which provides semantically relevant video for ay content.  I was also intrigued by Stickybits which enables the attachment of digital content to real world objects through bar codes, and GameChnger.io, which provides real time mobile score keeping , and has already registered over 6,500 teams.

The bottom line is that Silicon Alley will never have the same scale of start ups as Silicon Valley, but the city appears well on its way to being one of the major hubs of innovation for the massive social media revolution underway.  Now if we could just get one of those chunky IPOs (come on Gilt, Everydayhealth), or one of those $100mm+ buyouts (Foursquare?).