With the market for initial public offerings ailing, some in the venture capital industry have high hopes for new private markets for trading shares of startup companies.

The VC industry says private trading platforms will keep money flowing to capital-hungry startups that nowadays face a much longer road to the public market.

The trading platforms, of course, also would let company founders and venture firms cash out before any IPO, or before any merger or acquisition took place.

Some new private trading platforms, such as Nasdaq OMX's Portal Alliance and XChange, target big institutional investors and rich individuals.

Other such platforms make it easier for employees to sell some company stock.

Portal Alliance Opened Nov. 4

Portal Alliance, formed by nine investment banks and operated by the Nasdaq Stock Market, began trading on Nov. 4.

XChange, backed by Tim Draper, the founder of VC firm Draper Fisher Jurvetson, awaits approval from the Securities and Exchange Commission to operate.

In October, Second Market bought InsideVenture, looking to jump-start its move into the equity market.

New York-based Second Market is mainly known for running a private market for hard-to-trade mortgage-backed securities and other assets.

Facebook, Tesla Shares Sold

In April, Second Market began selling shares in private companies such as Facebook and Tesla Motors, mostly shares held by employees and founders.

It aims to connect with more investors by merging with InsideVenture, formed in 2008 by a few VC firms, including New Enterprise Associates.

It's not clear if the wave of private trading platforms will help revive the VC industry.

The number of VC firms has been shrinking as funding from pension funds and other big investors dries up.

Besides the recession, trading regulations in public markets have made it hard for startups to do IPOs, says David Weild, founder of consulting firm Capital Markets Advisory.

"It's growing darker and darker for small-cap stocks," said Weild, who co-authored a study on the declining number of publicly listed companies, released Monday by accounting firm Grant Thornton.

"The natural liquidity for small (capitalization companies) is drying up and, as a consequence, money isn't going into private enterprise because there's no exit strategy anymore," Weild said.

Sells To 144A Investors

Nasdaq's Portal Alliance sells shares to "qualified" institutional investors — those that manage more than $100 million in assets, under "144A" market rules. These rules let companies sell unregistered securities.

By selling shares of startups to institutional investors, the Portal Alliance should be able to transact sizable deals — in a range of $50 million to $100 million, says Pascal Levensohn, founder of Levensohn Venture Partners.