Comments on: Prediction Markets for Valuing Private Companies http://emergentfool.com/2009/06/03/prediction-markets-for-valuing-private-companies/ ...explorations in complex adaptive systems... Fri, 12 Mar 2010 19:27:27 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: David Pennock http://emergentfool.com/2009/06/03/prediction-markets-for-valuing-private-companies/#comment-2127 David Pennock Wed, 22 Jul 2009 13:36:44 +0000 http://emergentfool.com/?p=1687#comment-2127 I think this is a great idea. <a href="http://research.google.com/pubs/author103.html" rel="nofollow">Steve Lawrence</a> proposed this idea while we were at NEC and we pursued but not to completion creating a game called stupex.com, or startup exchange. Along the way we met a Canadian entrepreneur named <a href="http://en.wikipedia.org/wiki/Leonard_Brody" rel="nofollow">Leonard Brody</a> who went much further but still not to completion under the better name ipreo.com (play on pre-ipo). There are legal pre-ipo markets in <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=302279" rel="nofollow">Germany</a>. Apparently illegal ("gray market") but popular versions of these operate in <a href="http://www.chittorgarh.com/newportal/ipo_faq_detail.asp?a=28" rel="nofollow">India</a> as well. (One of the many things I learned during my recent trip to Bangalore.) It may be that both the regulatory environment and the public appetite is more ripe for this idea now. I say go for it! I think this is a great idea. Steve Lawrence proposed this idea while we were at NEC and we pursued but not to completion creating a game called stupex.com, or startup exchange. Along the way we met a Canadian entrepreneur named Leonard Brody who went much further but still not to completion under the better name ipreo.com (play on pre-ipo).

There are legal pre-ipo markets in Germany.
Apparently illegal (“gray market”) but popular versions of these operate in India as well. (One of the many things I learned during my recent trip to Bangalore.)

It may be that both the regulatory environment and the public appetite is more ripe for this idea now. I say go for it!

]]> By: danielhorowitz http://emergentfool.com/2009/06/03/prediction-markets-for-valuing-private-companies/#comment-2128 danielhorowitz Mon, 08 Jun 2009 19:40:08 +0000 http://emergentfool.com/?p=1687#comment-2128 @Rafe - You bring up a good point. Gaming the system will certainly be an issue. To prevent it, we would likely have to limit the total potential value of outstanding contracts to some fraction of the value stipulated in the contract. e.g. If there is a market for a startup valued at one million then the total value of outstanding contracts can only be 100-200k. Also, all trading will have to be completely open and transparent, much like the standard stock market should be. Then, if a founder or insider starts dumping shares then people know something is up, and can react accordingly. @Rafe – You bring up a good point. Gaming the system will certainly be an issue. To prevent it, we would likely have to limit the total potential value of outstanding contracts to some fraction of the value stipulated in the contract. e.g. If there is a market for a startup valued at one million then the total value of outstanding contracts can only be 100-200k. Also, all trading will have to be completely open and transparent, much like the standard stock market should be. Then, if a founder or insider starts dumping shares then people know something is up, and can react accordingly.

]]> By: rafefurst http://emergentfool.com/2009/06/03/prediction-markets-for-valuing-private-companies/#comment-2129 rafefurst Sat, 06 Jun 2009 17:00:03 +0000 http://emergentfool.com/?p=1687#comment-2129 Not surprisingly, I would also love to see such markets too. One thing I suspect will be a hurdle is the perception of (and actual potential for) manipulation. If the market on a startup's prospects is worth more than the startup itself, won't corruption be inevitable? Not surprisingly, I would also love to see such markets too. One thing I suspect will be a hurdle is the perception of (and actual potential for) manipulation. If the market on a startup’s prospects is worth more than the startup itself, won’t corruption be inevitable?

]]> By: Prediction Markets for Valuing Private Companies | Midas Oracle .ORG http://emergentfool.com/2009/06/03/prediction-markets-for-valuing-private-companies/#comment-2130 Prediction Markets for Valuing Private Companies | Midas Oracle .ORG Wed, 03 Jun 2009 20:24:51 +0000 http://emergentfool.com/?p=1687#comment-2130 [...] Cross-posted from emergentfool. [...] [...] Cross-posted from emergentfool. [...]

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