The State of the Private Markets: 2020

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EquityZen state of the private market blog with view of forest with sun

Up for a while, then down, then back up. The pandemic and attendant market volatility have taken public market investors on a roller coaster ride.

On the private market side, we have watched shareholders and investors respond to these swings in familiar ways. Shareholders, once holding out to see the S&P at 3,500, are becoming more interested in selling what might now be one of their most valuable assets, their private company stockholdings. Institutional investors, previously balking at what they perceived to be inflated pre-IPO valuations, are now entering the market in search of proven company exposure at modest prices. More to come on this later.  For now, the news of the day is consolidation.

In times of economic uncertainty, once fierce rivals can find themselves joining hands. The pre-IPO secondaries market, unique as it is, is no different in this respect.

Two weeks ago, we saw two industry players combine forces, in a transaction they say will enable improved service and transparency for clients and partners alike. The growth, and pace of change, in this industry over the past decade has been staggering. The pressure to innovate remains as strong as ever. As new players enter the market, others are gobbled up.

Eight years ago, the private markets, and my life, looked a lot different. I held shares in promising pre-IPO companies that I was hoping to turn into cash to buy my girlfriend (now wife) a wedding ring. While the sales proceeds would have been a life changing sum for me, the transaction size was too small for traditional brokers or then-typical secondary investors to entertain. It was this experience, and this disappointment, that led me to launch EquityZen in 2013. It is also the reason that, to this day, not only does EquityZen maintain the lowest transaction minimums in the industry, but we constantly drive them lower.

Having conducted more than 35,000 transactions in over 400 unique companies1, we may be ahead of others, yet hungry to get more done. Every day, the hardest working team in FinTech comes to the office searching for ways to better serve our clients. This means providing more seamless liquidity for shareholders so major life events don’t get put on hold, providing investment opportunities in a once closed-off asset class, and equipping issuers with the liquidity tools they need to attract and retain talent in an increasingly competitive labor market.

We have shied away from fragile transaction structures designed to circumvent that major stakeholder: the issuer. So, despite the large of number of dollars that flow through those structures each year—some with meager principal-protection insurance, others without even that—every share transfer on EquityZen’s platform bakes in issuer approval and culminates in the transfer of the underlying shares at the time of investment, not years later at exit. EquityZen is proud to be, now, the only platform that requires share certificates upon transfer, giving each issuer a prominent seat at the table in delivering controlled liquidity to their shareholders. EquityZen remains resolute in our commitment to grow this business, and lead this industry, in partnership with issuers.

Our approach makes a world of difference: if you are an investor, this means you own an asset that holds the actual shares, not a promise of them; if you are a seller, this means you can sleep at night knowing you have transacted in accordance with the company’s rules; if you are the issuer, you know your shareholder has complied with the transfer restrictions you put in place.

In addition to our work with traditional business stakeholders, EquityZen is also proud to have engaged regulators, and where appropriate, advocated for reform, to ensure that our industry conducts itself in a responsible manner that is worthy of expanded investor access.

Since the beginning, we have strived to bring about a new pre-IPO reality: Private Markets for the Public

We keep reading about dramatic private market movements and how new entrants or combined entities will bring about the future of pre-IPO investing. I invite anyone who is interested to join EquityZen to experience that future -- today.

 

Note: Updated as of December 2022

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