Upstart startups

The story of secondaries over the past decade is one of rapid growth and transformation in terms of volumes transacted, money raised and the size and shape of deals. In other ways, however, little has changed.

The same large buyers dominate transaction volume. While there are digital platforms for buying and selling fund stakes, the vast majority of transactions take place outside them. Robots are not yet gunning for advisors’ jobs. Innovations such as the GP-led platform developed by Park Hill and Nasdaq Private Market still have human power at their core, as Secondaries Investor reported last month.

Yet there are a growing number of startups who believe disruption is not just desirable but inevitable. Secondaries Investor is gearing up to publish in-depth looks at three of them: Rivver, Collective Equity Ownership and Seedrs.

Tel Aviv-headquartered Rivver was founded last year and uses tokenisation technology to create a digital representation of an LP stake, allowing it to be traded securely and instantly on a blockchain-based trading platform. Its goal is to do away with the role of intermediaries and lawyers in the sale of LP stakes. 

“Most of the GPs I speak to say, ‘OK, I can definitely understand this is where we’re going … Either we fight against technology or we embrace it now and then be able to capitalise on it,” founder David Benizri tells Secondaries Investor.

London-based Collective Equity Ownership allows founders, investors and employees of private companies to get liquidity without selling shares. Founded two years ago by former naval architecture student Archimede Mulas, the startup allows participants to contribute a proportion of economic rights on their shares to a pool. One member of the pool benefits from the exit events and dividends of all members, so shareholders don’t have to wait for their own liquidity event to see cash.

Crowdfunding platform Seedrs has a secondary market that allows retail and professional investors to buy and sell shares in private companies at the valuation determined by their last funding round. Seedrs takes a 7.5 percent cut of profits accrued on sales, of which 4,360 have taken place worth £3.5 million ($4.5 million; €4 million). The rate of adoption could well increase with the release this week of a platform upgrade, which lets buyers view indicative valuations of companies and changes in their share prices, just like a public share-trading platform.

Is the secondaries market ready to be disrupted? Stay tuned to find out.

Write to the author: rod.j@peimedia.com