Bronte Media

Longtime readers of this blog will know that I have been very down and very skeptical of Spot Runner from day one. Even when the firm was raising huge amounts of money, things just didn’t seem to add up. As recently as last May the firm was able to raise $50m and the company has in total raised a little over $100m.

Techcrunch reports on the lawsuit by WPP, an investor in the company, who is effectively complaining about being the greater fool because they didn’t sell their shares on the secondary market like founders Nick Grouf and David Waxman, as well as series A investors Index Ventures and Battery Ventures.

There are a number of interesting points:

- A total of $54m of secondary market transactions occurred for a company that had raised $101m in total and was far from proven and had very little to show in terms of progress.

- It may seem shocking that Grouf sold nearly $27m just himself. But I am more shocked that there were actually other people on the opposite side of the transaction: I wonder who in their right mind would want that much of Spotrunner?

- The secondary market seems to have emerged. Long have there been rumours about active trading in Facebook shares but when 50% of total capital raised is traded for a company like Spotrunner it shows there is a large unserved demand. Now that SOX and the economy has shut off young, unprofitable companies from the public markets, it will be interesting to see how the secondary private market develops in the next five years.

- Index and Battery doubled their money by getting out early on a dud investment. Kudos to them.