June 1, 2009

Barry Silbert Named to Crain's 2009 Top Entrepreneurs

This year's six winners are weathering the economic storm

Against the bleakest economic backdrop in decades, Crain’s top entrepreneurs of 2009 are true standouts. Some are mapping innovative ways to weather the storm, while others are finding ways to actually benefit from it.

At SecondMarket, an online marketplace for trading financial instruments, founder Barry Silbert is setting up sites where mountains of subprime mortgages and other toxic securities can be bought and sold.

SecondMarket’s revenues tripled last year, and Mr. Silbert—who started the company in his Union Square apartment—recently set up shop in a landmark lower Broadway tower.

Victoria Aviles is adding new products. Not one to take a 20% drop in business at her two dry cleaning shops lying down, she is offering services ranging from shoe polishing and repair to closet organizing. “I am willing to do anything in the world to keep the business growing,” she says.

All six of our winners also share their best recession strategies and biggest recession fears.

Crain's also asked our six winners to rank the on-the-job performance for President Barack Obama, Gov. David Paterson and Mayor Michael Bloomberg on a scale of 1 to 10, with 10 being the top score. Our top entrepreneurs gave Mr. Obama an average score of 7.9, Mr. Paterson and average score of 7.2 and Mr. Bloomberg an average score of 8.8. All six winners put the three politicians in the same order, disagreeing only on their numerical rankings.

2009 WINNERS
•BIMMY'S
•SAM SCHWARTZ ENGINEERING
•BROOKLYN BREWERY
•BRIDGE CLEANERS & TAILORS
•SECONDMARKET
•ETSY

SecondMarket
Online exchange has trade surplus
Draws buyers, sellers of illiquid assets

When Barry Silbert was an investment banker struggling to sell off pieces of a bankrupt Enron Corp. six years ago, he kept asking himself the same question: “Wouldn’t it make sense if there was an organized marketplace, like eBay, where illiquid assets could be bought and sold?”

Six years later, the answer is a resounding “yes.”

Proof of the pudding is a wildly successful outfit called SecondMarket that Mr. Silbert co-founded in 2004. Today it boasts 3,000 registered participants, who to date have traded $750 million worth of assets in a total of 2,000 transactions on the online market. Last year the company’s revenues more than tripled. It collects a fee of 2% of the value of the trade from both sides.

Mr. Silbert traces his prowess trading illiquid assets—goods that are hard to price, much less sell—all the way back to his childhood.

“I was always entrepreneurial, but especially so after my father died when I was 10,” he says. “Back then I set up forums for trading baseball cards, which are essentially illiquid assets.”

He and his partner, the late Brad Monks, spent a year developing SecondMarket’s technology after raising $350,000 from angel investors. But by the time they went live in the summer of 2005, they had done enough old-fashioned canvassing among big investors and Wall Street figures—including the co-chief executive of Houlihan Lokey, the investment bank where Mr. Silbert worked—to give the venture instant buzz.

“SecondMarket understood early on that illiquid assets don’t sell themselves,” said David Weild IV, a former vice chairman of Nasdaq and a senior consultant to SecondMarket.

Mr. Silbert says SecondMarket works because it combines whiz-bang technology with good old human interaction. In addition to offering users state-of-the-art trading software, the company has the bulk of its 100 staffers—up from just seven in 2006—working directly with users to answer any questions they may have. Company officials also spread the word by speaking at conferences and networking.

Two years ago, Mr. Silbert raised $3.8 million from venture capital firm FirstMark Capital in return for a 25% stake.

Financial cushion

“We never tapped into the money but knowing it was there for a rainy day gave me the confidence to scale up,” says Mr. Silbert.

He has watched his pennies since the early days, when the company was based in his Union Square living room and client meetings were held at a nearby Starbucks.

With the financial crisis have come immense growth opportunities, as investors seek to unload hundreds of billions of dollars worth of illiquid assets. To seize his opportunity, Mr. Silbert added five more online marketplaces that banks can use as an auction block for toxic assets ranging from mortgage-backed securities to collateralized debt obligations. With business booming, he moved the company in the fall to its first fancy address, the landmark Standard Oil building on lower Broadway.

“Trillions of dollars of assets that were once liquid have turned illiquid during the financial meltdown,” says Mr. Silbert.

ON MAKING IT IN NYC

“In my case I operate by the philosophy that it’s critical to grow a company within its means. In New York City, real estate is a significant barrier. My first office was the living room couch in my apartment. I rented an office when I could justify it economically. And rather than lease space in a Class A building, I took a cost-efficient, no-frills office two blocks from Wall Street.

When we had to meet clients, we suggested Starbucks because our office didn’t have conference space. It was only recently, in order to accommodate a staff of 100, that we moved to 26 Broadway, the landmark Standard Oil Building."

ON GIVING BACK

“I created the Annual Cure Carcinoid Golf Tournament and charity auction in memory of Brad Monks, my dear friend and first business partner at Second Market, who died two years ago at age 40. We also have an art outreach program benefiting schools in lower Manhattan. Art students display paintings for sale on our floor, and the proceeds go to the school’s art program. SecondMarket will be one of the first employers under JumpStart NYC, a job training and placement pilot program for laid-off financial sector workers.”

— Tina Traster