EquityZen
/
Overview
EquityZen is an online marketplace for buying secondary shares of private companies. Private company shareholders can sign up with what they are offering. Accredited Investors can then browse EquityZen's platform and offer a deal for the shares they are interested in. EquityZen handles all the transaction details including getting the private company's permission. As they scale the firm has lowered the minimum investment size from millions of dollars to thousands. They have to date worked with several dozen Unicorns including Cloudera, Lyft, SquareSpace and AppDynamics.
Wait you say, this has been done before by SecondMarket (acquired by NASDAQ in 2015). The difference with EquityZen is they structure the transaction as a derivative to transfer the economics of the shares without transferring legal ownership. Basically it makes the transaction company friendly as no strangers gain control rights and no change to the cap table. This fundamental difference gives them a leg up on SecondMarket. The founder's like to refer to this as Secondaries 2.0.
Why I like Them
I like them because I think there has been a heavy unmet need for this type of product that continues to grow, especially as the number of unicorns soars. It's no secret that there are fewer companies going public today than in the last 30 years for a variety of reasons. As private markets become the new public markets, platforms like EquityZen allow employees to take some money off the table. Simultaneously, it opens the door to accredited investors not able to invest in venture capital firms but seeking higher returns in more "exotic" asset classes like startups. It also allows easier portfolio rebalancing for institutional investors.
Where you will really see a platform like EquityZen take off is in the event of a financial crisis or recession. As shareholders seek liquidity for otherwise illiquid pre-IPO stock, supply will jump on the platform bringing more savvy "value" style investors to the table.
They have a lot of competition with several other players in the space so it will be interesting to see if there difference in deal structure is a strong enough differentiator.
Disclosure: All information is from publicly available sources, I have not had any contact with a member of the company or its investors.
