GSV Capital: Getting in on the Top IPOs Before They Go Public

Can’t wait for that next big tech stock IPO? Buy shares of GSV Capital (Nasdaq: GSVC) instead.

The San Francisco-based business-development company invests in the biggest names in technology before they go public. Facebook, Twitter and Zynga are among GSV Capital’s impressive roster of 17 investments, all bought when those companies’ IPOs were little more than a rumor.

According to the company’s founder Michael Moe, that portfolio is growing. I traded emails with Moe earlier today, and he expects GSV Capital’s revenue to more than double in size in 2012. He puts GSV Capital’s 2011 revenue at $9.8 billion – nearly triple the $3.8 billion the company made last year – and he expects the number to rise to $22.5 billion next year.

‘We are looking to invest in the fastest growing, most dynamic companies in the world,” Moe told me.

Those generally include growth sectors of the economy – which is why GSV’s portfolio is heavy on the tech stocks. Social media, mobile computing/applications, software service, cloud computing, green technology and education technology are the six investment themes that make up 90% of GSV Capital’s investments.

The company buys some of its private shares through either current or former employees at those companies, other early investors, or consultants who had been paid in stock. GSV also snatches up shares though secondary exchanges of private stock, such as Sharespost or Second Market.

GSV Capital vets the best private, venture capital-backed companies with market values of more than $100 million by ranking them based on what Moe calls the “4P Formula”: People, Product, Potential and Predictability.

“We then essentially create an ‘NFL Draft’ to rank the top 50 or so venture capital-backed private companies in the world,” Moe explains. “We generally are getting involved after the early venture capital rounds and more when a company enters the ‘emerging growth’ space. The sweet spot is between $100 million and $2 billion in value.”

Once it invests in a company, GSV Capital announces the purchase shortly thereafter and lists all its holdings in its quarterly filings. They also communicate their holdings to investors through their website (

GSV Capital went public itself back in April of this year, trading at $15.10 after its IPO. It has since risen to a high of $19.97 and dipped to a low of $9.75. The stock is currently trading near its IPO price, at $15.20 a share.

Because GSV strictly buys shares of private companies, it can be difficult to determine the value of the company’s holdings. But GSV Capital’s appeal for investors is clearly in the immense potential of its investments once they do go public.

“Investors are looking for us to (give) access (to) leading private companies,” says Moe.

For more information about GSV Capital, check out this Barron’s article from earlier this month.

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