附近上门

As both private and public markets continue to be inundated with capital, investors seem to be looking for new ways to invest鈥攁nd platforms offering ways to buy into private companies seem to be having their moment.

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While platforms like New York-based and the have been in the space for years, the last several months has seen a plethora of activity among marketplace builders. While it may seem all of a sudden, it really has been years in the making, according to those in the industry. Some off those highlights include:

• San Francisco-based equity management company raised a $500 million Series G led by at a $7.4 billion valuation in August, just six months after unveiling its own private stock exchange, CartaX;
• San Francisco-based secondary marketplace announced plans in mid-September to merge with the SPAC Motive Capital in a deal valuing the company at $2 billion. The merger is expected to close late this year or in early 2022 and comes less than a year after Forge merged with private securities marketplace ;
• In late September, San Francisco-based announced its Securitize Markets鈥攚hich allows for the trading of a broad range of alternative assets, including private company equity鈥攁fter raising a $48 million Series B in June; and
• The next day, Palo Alto-based , which helps employees receive capital to exercise stock options, closed a $55 million Series B led by existing investor , after realizing 500 percent year-to-year growth. The round came just seven months after its $20 million Series A.

, founding partner at Group 11, said the increased interest in the space is not surprising, with more than 12 million tech workers in the U.S. alone鈥攁 growing number鈥攁nd many with equity holdings that can be difficult to monetize.

鈥淭he market is broken and needs to be improved,鈥� Frances said.

Start at the beginning

One problem the private market has faced is that it still seems opaque to many.

鈥淢ost employees don鈥檛 understand equity,鈥� said , founder and CEO of EquityBee. 鈥淵ou can find an engineer who knows all about algorithms, but knows nothing about equity.鈥�

Part of the reason likely is that the market is relatively new, launching really in the last half decade after the JOBS Act facilitated private companies with less than $1 billion in revenue to solicit investments publicly, said , founder and CEO of Securitize.

Since then, demand for marketplaces has grown as employees have become more educated about the equity they hold and investors see an opportunity to invest even before a traditional IPO exit occurs.

Domingo said the latter is especially important to remember as times have significantly changed since a company like could go public just three years after being founded and create most of its value in the public markets.

Amazon had an initial market cap of $438 million after its IPO. Today, its market cap sits around $1.6 trillion.

鈥淢ost companies no longer create most of their value after they go public,鈥� said Domingo, whose Securitize marketplace is focused mainly on the blockchain and crypto space. 鈥淣ow IPOs mainly are ways for founders and early investors to exit.鈥�

That has created demand in the market鈥攚ith private capital markets growing at more than twice the pace of the traditional public markets according to a of offerings after the JOBS Act went into effect, he said. However, private market trading activity is just a fraction鈥�1/300th鈥攖hat the traditional public markets see.

Growing education

While many secondary platforms pair up with companies to help employees manage their equity, Barzilai鈥檚 EquityBee platform goes directly to employees, many of whom are trying to make the hard鈥攁nd potentially costly鈥攄ecision of whether or not to exercise their options when leaving a company.

Barzilai said while startup employees used to treat stock options as a lottery ticket, more and more are starting to understand equity.

鈥淧eople are seeing that equity can be a life-changing event,鈥� said Barzilai, adding employees are now looking for a transparent solution to access their money as companies stay private longer.

鈥淐ompanies are now taking 12 years to go public,鈥� he said. 鈥淧eople change jobs and need to sell, so they need a solution.鈥�

The market for private markets

While many of the private companies that offer secondary marketplaces do not release financial details, 鈥攁s a public company鈥攄oes release details on its Nasdaq Private Markets platform. In 2020, Nasdaq said the marketplace took part in 90 liquidity programs valued at $4.5 billion.

More recently, for the quarter ended June 30, Nasdaq said from last year 鈥減rimarily driven by higher U.S. listing revenues due to an increase in the overall number of listed companies and higher Nasdaq Private Markets revenues.鈥�

EquityBee’s growth led it to raise a Series B just seven months after its Series A, said Barzilai.

鈥淲e were growing faster than expected,鈥� he said. 鈥淭he Series B was expected in Q4 of this year 鈥� but many VCs approached us.鈥�

The Series B was preempted by the company鈥檚 current investors, Barzilai said.

Securitize had a similar experience with investors while raising its oversubscribed Series B, Domingo said.

鈥淚 think many people recognize this is a huge market,鈥� said Domingo, who believes this could be a $400 billion opportunity.

With a market that big, many of those in the industry believe there could be several winners. However, with a market that large, there also likely will be several large financial players who would like to get into the sector.

Barzilai said he already has seen a lot of interest from 鈥渙ld-school financial institutions鈥� looking mainly to partner for now.

鈥淲e expect things to get way more interesting,鈥� said Barzilai, adding he expects these financial companies to mainly partner in the space.

Frances also expressed skepticism on other established companies looking to enter space. However, after leading EquityBee鈥檚 seed, Series A and Series B, he is sure of one thing.

鈥淚鈥檇 be happy to lead the next round as well,鈥� Frances said.

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