5 ms·

Equidate's new stock market for private tech offers in-depth data on startups

66 points by sohailprasad 10y ago

twinkletwinkle 10y ago
Anyone remember Sandhill Exchange, and how badly they got slapped around by the SEC? I'd steer clear of this sort of thing until further notice.
- a_small_island 10y ago
  >"Sand Hill began as two Silicon Valley entrepreneurs creating an online business involving the valuation of private startup companies in the region along the lines of a fantasy sports league. But Gerrit Hall and Elaine Ou changed their business model multiple times, and earlier this year Sand Hill evolved to invite web users to use real money to buy and sell contracts referencing pre-IPO companies and their value. Sand Hill sought people to fund accounts using dollars or bitcoins. Hall and Ou did not ask users about their financial holdings or limit the offering to users with any specific amount of assets. In fact, they wrote on the Sand Hill website: “We accept everybody regardless of accreditation status.” Hall and Ou intended to pay users who profited from their contracts. " Interesting. Hadn't heard of this. Here's the SEC link: https://www.sec.gov/news/pressrelease/2015-123.html https://www.sec.gov/news/pressrelease/2015-123.html
- sohailprasad 10y ago
  Hi there, co-founder of Equidate here, happy to answer any questions you have. We're well aware of Sandhill Exchange — they were akin to a prediction market — we're a market where employees and investors who own shares are able to get liquidity, and accredited investors are able to invest. We've worked with our primary outside counsel, Lowenstein Sandler (an internationally-prominent securities law firm), to ensure our compliance with all regulation. As the article mentions, we've discussed Equidate with regulators since 2014, and this past January FINRA approved our purchase of a broker-dealer. Finally, we've gone above and beyond to make sure our customers are protected. We have an exclusive underwriting agreement and insurance policy with Munich Re, the world's largest reinsurance company, to protect our investors from fraud. It's very rare for a startup our size to have a full-time Chief Legal Officer & Chief Compliance Officer, and it's a testament to our efforts to get this right.
  - vadym909 10y ago
    Can you explain in plain English what 'insider' information you publish and how you allow trading in private companies when this clearly is not possible elsewhere. And if it is possible why don't these companies just IPO.
    - Arnt 10y ago
      It's possible to trade in private companies. I've done it. What you need is a willing seller and a willing buyer. Finding a willing other party is the trick, in part because a lack of information makes people wary of trading. So this company provides a little more information and a matchmaking registry.
    - sohailprasad 10y ago
      Sure thing. We share information about companies' stock prices, share counts, and valuations — data that has historically unavailable, inaccurate, and/or very expensive (tens to hundreds of thousands of dollars per year). We show you real-time news about these companies, and let you track the value of your portfolio if you're an investor or employee. We've built tools to use this data: https://equidateinc.com/browse https://equidateinc.com/browse Without even signing up, you can answer questions like: "Show me Series B/C companies that have raised $10-100M, have a valuation of $100M-$1B, have less than 200 employees, with a B2B business model in the Transportation industry." We think that's awesome — whether you're an investor looking for investment opportunities, an employee looking for a new job, or a just doing research on companies, it can be incredibly powerful for the entire ecosystem to have access to this data and the tools to use it. Companies don't IPO for a variety of reasons. Going public is a source of financing for companies — in recent years, with hedge funds and private equity firms participating in Series B/C/Ds++, there is a lot more capital available in the private market. New regulation has made it far more expensive to go public and to stay public. Going public is arduous on the company from the perspective of the time and attention it takes from management. And finally, once a company is public, they are subject to the whims of the market and have to answer to new investors who have a short-term focus on quarter-to-quarter earnings, often at the cost of not being able to have full autonomy to execute on their long-term vision.
  - 10y ago
deleted 10y ago
[deleted]
YuriNiyazov 10y ago
How is this possible if most employee stock has right of first refusal built-in?
- cloudjacker 10y ago
  That's for transferring, the sale only. And the lack of transparency means we also don't know if "most" is really like that, no matter how standard your CEO said it was. The three startups you worked for probably share some venture capital firm or related board member that copy and pasted the equity contract But it didn't mean, necessarily, that condition is so prevalent or that much of a roadblock
  - YuriNiyazov 10y ago
    Dude. Bro. I advise other people on their stock grants, and see this all the time. Thanks for assuming I'm just a schlob.
    - cloudjacker 10y ago
      ESO Fund?
    - dsjoerg 10y ago
      "just a schlob". on my next business card.
    - gilbug 10y ago
      Hi, company lawyer here. Sorry if that sounded dismissive. You're completely right that there's a right of first refusal built somewhere into most stock issuances to team members. They vary in who holds the right, the range of transactions that trigger the right, exceptions to the right, and how it operates. Accordingly, we look at the paperwork for each company and each shareholder in order to structure a transaction that works, if possible.
- x0x0 10y ago
  Would the employee care? The right of first refusal means your employer has to match the $. Buyers may be scarce if too many employees are so encumbered though. Is that your concern?
formula1 10y ago
A mentor of mine told me this is a legal nightmare. I imagine if there is enough demand the state will be forced to adapt to the market. But this kind of probably will go through some growing pains
Dr_tldr 10y ago
So this is either a glorified bucket shop or yet another company with the brilliant idea of setting up an unregulated secondary market selling an incredibly wide variety of different ownership instruments that were never intended to be sold. IANAL, but if I was their counsel, I would definitely advise them to keep paying me a lot of money for a 10% chance it somehow works out with the regulators.
kriro 10y ago
Could I sell Equidate options on Equidate?
- gilbug 10y ago
  CLO-dude here. Hmm. We are still fine-tuning the option plan so for now as a technical matter, no. When we do flip that switch, I expect that we will offer our optionees, like other team members, early investors, advisors, and other shareholders at least as much liquidity as we expect out of the rest of the industry. All of our stock agreements to date contemplate secondary liquidity. We might have to do that via third parties — I haven't thought through the implications of trading Equidate shares on Equidate. It sounds like a Malkovich moment.
serge2k 10y ago
How does a market that lets people buy and sell shares without the company going public not get immediately slapped around by the SEC? This all just feels wrong to me. As an employee selling shares how can I be sure I'm not getting screwed over by anyone? The entire thing just seems shady.
- gilbug 10y ago
  As the company's in-house lawyer, I see that people who have a lot of stock have generally hired a wealth manager, financial advisor, or personal lawyer who advises them on transactions, or learn through colleagues who have done so. Some lawyers specialize in employee equity, or private transactions more generally. Shares of stock can be bought and sold like other financial assets, subject to any regulations and contract obligations that apply. That's a definitional attribute of stock and other securities. Public markets are a layer on top of that, not something fundamentally different. Employee shareholders who are not directors, officers, or 10% owners generally fall under a 4(a)(1) exemption from registration. There are a bunch of online resources on the topic, for example http://securities-law-blog.com/2015/06/23/section-4a1-4a1%C2%BD-exemption-recommendations-amendment-rule-144-related-shell-companies/ http://securities-law-blog.com/2015/06/23/section-4a1-4a1%C2... (no connection and not an endorsement, the site just looks helpful).
bear_south 10y ago
went to site and got an im like this.. soahil prasad see you here so hopefully you can explain. Feels extremely shady. Obviously you are not letting me insantly make a 2500% return, but your instant help message says this... what kind of gimic? (or was system hacked... trying to give you benefit of the doubt!) Equidate's Pre-IPO Promotion: Get access to FB at $4.54! Hi there, thanks for checking out Equidate! We're incredibly excited about giving the world early access to high growth private tech companies. To show you what we mean, we're giving you a second chance to get in early on two of the world's most successful companies — Facebook and Tesla — at their pre-IPO prices! Sign up here to get in on Facebook at $4.54 (the price at its Series E in May 2009 where DST Global invested $200M) instead of its recent price of over $115. You can share the following link with your friends! https://early.equidateinc.com/ https://early.equidateinc.com/
- bear_south 10y ago
  It appears to be email grab... but this is straight gimicry and is it even legal????
  - sohailprasad 10y ago
    Yes, it is legal. As per the event page: The promotion is not an offer to buy or sell securities, nor are the certificates sold in the promotion securities. Once your purchase is confirmed, we'll send you information via email on how to fulfill your purchase and your certificate. The certificate is redeemable either for securities through a broker-dealer for those who setup an account, or else for merchandise. All of the proceeds from our Early Is Everything Pre-IPO Pricing Event are being donated to MissionBit, a Bay Area nonprofit that sponsors underprivileged high school students in the San Francisco Bay Area to learn computer development skills.
- sohailprasad 10y ago
  We're running a promotional event called the Early Is Everything Pre-IPO Pricing Event this Thursday (7/28) and next (8/4) to celebrate the launch of our new trading platform. We'll be giving over 100 people the opportunity to get in early on Facebook ($4.54) and Tesla ($2.97). As per the Event FAQ on the linked site, we're taking a loss on every certificate to prove a point — that when it comes to investing in the most successful companies in the world, early is everything. The "Early is Everything" promotion offers eligible participants the opportunity to purchase a certificate at the pre-IPO price of either Facebook or Tesla Motors, redeemable for securities through a registered broker-dealer, or for merchandise, at the current price of these companies as of July 13, 2016. Offer good while supplies last. Other terms and restrictions apply, please see event page for full details. See: https://early.equidateinc.com/ https://early.equidateinc.com/
thomasdub 10y ago
Would you consider adding some of the startup valuations from different mutual funds to add context to the valuations? Your latest valuation for DropBox is $19.10 but various mutual funds have valued them between $9.75 and $12.30 in Q2 2016 [0]. I think it would add context and be useful for buyers and sellers - I'm not sure anyone would buy DropBox for $19.10 today, and it's giving employees with options false hope that they would get that amount. [0] http://graphics.wsj.com/tech-startup-stocks-to-watch/ http://graphics.wsj.com/tech-startup-stocks-to-watch/
neals 10y ago
So what happens if the company goes public?
aphextron 10y ago
"a market for trading shares of private companies" So... the stock market? How can this possibly be legal?

66 points by sohailprasad 10y ago

Anyone remember Sandhill Exchange, and how badly they got slapped around by the SEC? I'd steer clear of this sort of thing until further notice.

a_small_island 10y ago
>"Sand Hill began as two Silicon Valley entrepreneurs creating an online business involving the valuation of private startup companies in the region along the lines of a fantasy sports league. But Gerrit Hall and Elaine Ou changed their business model multiple times, and earlier this year Sand Hill evolved to invite web users to use real money to buy and sell contracts referencing pre-IPO companies and their value. Sand Hill sought people to fund accounts using dollars or bitcoins. Hall and Ou did not ask users about their financial holdings or limit the offering to users with any specific amount of assets. In fact, they wrote on the Sand Hill website: “We accept everybody regardless of accreditation status.” Hall and Ou intended to pay users who profited from their contracts. " Interesting. Hadn't heard of this. Here's the SEC link: https://www.sec.gov/news/pressrelease/2015-123.html https://www.sec.gov/news/pressrelease/2015-123.html
sohailprasad 10y ago
Hi there, co-founder of Equidate here, happy to answer any questions you have. We're well aware of Sandhill Exchange — they were akin to a prediction market — we're a market where employees and investors who own shares are able to get liquidity, and accredited investors are able to invest. We've worked with our primary outside counsel, Lowenstein Sandler (an internationally-prominent securities law firm), to ensure our compliance with all regulation. As the article mentions, we've discussed Equidate with regulators since 2014, and this past January FINRA approved our purchase of a broker-dealer. Finally, we've gone above and beyond to make sure our customers are protected. We have an exclusive underwriting agreement and insurance policy with Munich Re, the world's largest reinsurance company, to protect our investors from fraud. It's very rare for a startup our size to have a full-time Chief Legal Officer & Chief Compliance Officer, and it's a testament to our efforts to get this right.
- vadym909 10y ago
  Can you explain in plain English what 'insider' information you publish and how you allow trading in private companies when this clearly is not possible elsewhere. And if it is possible why don't these companies just IPO.
  - Arnt 10y ago
    It's possible to trade in private companies. I've done it. What you need is a willing seller and a willing buyer. Finding a willing other party is the trick, in part because a lack of information makes people wary of trading. So this company provides a little more information and a matchmaking registry.
  - sohailprasad 10y ago
    Sure thing. We share information about companies' stock prices, share counts, and valuations — data that has historically unavailable, inaccurate, and/or very expensive (tens to hundreds of thousands of dollars per year). We show you real-time news about these companies, and let you track the value of your portfolio if you're an investor or employee. We've built tools to use this data: https://equidateinc.com/browse https://equidateinc.com/browse Without even signing up, you can answer questions like: "Show me Series B/C companies that have raised $10-100M, have a valuation of $100M-$1B, have less than 200 employees, with a B2B business model in the Transportation industry." We think that's awesome — whether you're an investor looking for investment opportunities, an employee looking for a new job, or a just doing research on companies, it can be incredibly powerful for the entire ecosystem to have access to this data and the tools to use it. Companies don't IPO for a variety of reasons. Going public is a source of financing for companies — in recent years, with hedge funds and private equity firms participating in Series B/C/Ds++, there is a lot more capital available in the private market. New regulation has made it far more expensive to go public and to stay public. Going public is arduous on the company from the perspective of the time and attention it takes from management. And finally, once a company is public, they are subject to the whims of the market and have to answer to new investors who have a short-term focus on quarter-to-quarter earnings, often at the cost of not being able to have full autonomy to execute on their long-term vision.
- 10y ago

deleted 10y ago

[deleted]

YuriNiyazov 10y ago

How is this possible if most employee stock has right of first refusal built-in?

cloudjacker 10y ago
That's for transferring, the sale only. And the lack of transparency means we also don't know if "most" is really like that, no matter how standard your CEO said it was. The three startups you worked for probably share some venture capital firm or related board member that copy and pasted the equity contract But it didn't mean, necessarily, that condition is so prevalent or that much of a roadblock
- YuriNiyazov 10y ago
  Dude. Bro. I advise other people on their stock grants, and see this all the time. Thanks for assuming I'm just a schlob.
  - cloudjacker 10y ago
    ESO Fund?
  - dsjoerg 10y ago
    "just a schlob". on my next business card.
  - gilbug 10y ago
    Hi, company lawyer here. Sorry if that sounded dismissive. You're completely right that there's a right of first refusal built somewhere into most stock issuances to team members. They vary in who holds the right, the range of transactions that trigger the right, exceptions to the right, and how it operates. Accordingly, we look at the paperwork for each company and each shareholder in order to structure a transaction that works, if possible.
x0x0 10y ago
Would the employee care? The right of first refusal means your employer has to match the $. Buyers may be scarce if too many employees are so encumbered though. Is that your concern?

formula1 10y ago

A mentor of mine told me this is a legal nightmare. I imagine if there is enough demand the state will be forced to adapt to the market. But this kind of probably will go through some growing pains

Dr_tldr 10y ago

So this is either a glorified bucket shop or yet another company with the brilliant idea of setting up an unregulated secondary market selling an incredibly wide variety of different ownership instruments that were never intended to be sold. IANAL, but if I was their counsel, I would definitely advise them to keep paying me a lot of money for a 10% chance it somehow works out with the regulators.

kriro 10y ago

Could I sell Equidate options on Equidate?

gilbug 10y ago
CLO-dude here. Hmm. We are still fine-tuning the option plan so for now as a technical matter, no. When we do flip that switch, I expect that we will offer our optionees, like other team members, early investors, advisors, and other shareholders at least as much liquidity as we expect out of the rest of the industry. All of our stock agreements to date contemplate secondary liquidity. We might have to do that via third parties — I haven't thought through the implications of trading Equidate shares on Equidate. It sounds like a Malkovich moment.

serge2k 10y ago

How does a market that lets people buy and sell shares without the company going public not get immediately slapped around by the SEC? This all just feels wrong to me. As an employee selling shares how can I be sure I'm not getting screwed over by anyone? The entire thing just seems shady.

gilbug 10y ago
As the company's in-house lawyer, I see that people who have a lot of stock have generally hired a wealth manager, financial advisor, or personal lawyer who advises them on transactions, or learn through colleagues who have done so. Some lawyers specialize in employee equity, or private transactions more generally. Shares of stock can be bought and sold like other financial assets, subject to any regulations and contract obligations that apply. That's a definitional attribute of stock and other securities. Public markets are a layer on top of that, not something fundamentally different. Employee shareholders who are not directors, officers, or 10% owners generally fall under a 4(a)(1) exemption from registration. There are a bunch of online resources on the topic, for example http://securities-law-blog.com/2015/06/23/section-4a1-4a1%C2%BD-exemption-recommendations-amendment-rule-144-related-shell-companies/ http://securities-law-blog.com/2015/06/23/section-4a1-4a1%C2... (no connection and not an endorsement, the site just looks helpful).

bear_south 10y ago

went to site and got an im like this.. soahil prasad see you here so hopefully you can explain. Feels extremely shady. Obviously you are not letting me insantly make a 2500% return, but your instant help message says this... what kind of gimic? (or was system hacked... trying to give you benefit of the doubt!) Equidate's Pre-IPO Promotion: Get access to FB at $4.54! Hi there, thanks for checking out Equidate! We're incredibly excited about giving the world early access to high growth private tech companies. To show you what we mean, we're giving you a second chance to get in early on two of the world's most successful companies — Facebook and Tesla — at their pre-IPO prices! Sign up here to get in on Facebook at $4.54 (the price at its Series E in May 2009 where DST Global invested $200M) instead of its recent price of over $115. You can share the following link with your friends! https://early.equidateinc.com/ https://early.equidateinc.com/

bear_south 10y ago
It appears to be email grab... but this is straight gimicry and is it even legal????
- sohailprasad 10y ago
  Yes, it is legal. As per the event page: The promotion is not an offer to buy or sell securities, nor are the certificates sold in the promotion securities. Once your purchase is confirmed, we'll send you information via email on how to fulfill your purchase and your certificate. The certificate is redeemable either for securities through a broker-dealer for those who setup an account, or else for merchandise. All of the proceeds from our Early Is Everything Pre-IPO Pricing Event are being donated to MissionBit, a Bay Area nonprofit that sponsors underprivileged high school students in the San Francisco Bay Area to learn computer development skills.
sohailprasad 10y ago
We're running a promotional event called the Early Is Everything Pre-IPO Pricing Event this Thursday (7/28) and next (8/4) to celebrate the launch of our new trading platform. We'll be giving over 100 people the opportunity to get in early on Facebook ($4.54) and Tesla ($2.97). As per the Event FAQ on the linked site, we're taking a loss on every certificate to prove a point — that when it comes to investing in the most successful companies in the world, early is everything. The "Early is Everything" promotion offers eligible participants the opportunity to purchase a certificate at the pre-IPO price of either Facebook or Tesla Motors, redeemable for securities through a registered broker-dealer, or for merchandise, at the current price of these companies as of July 13, 2016. Offer good while supplies last. Other terms and restrictions apply, please see event page for full details. See: https://early.equidateinc.com/ https://early.equidateinc.com/

thomasdub 10y ago

Would you consider adding some of the startup valuations from different mutual funds to add context to the valuations? Your latest valuation for DropBox is $19.10 but various mutual funds have valued them between $9.75 and $12.30 in Q2 2016 [0]. I think it would add context and be useful for buyers and sellers - I'm not sure anyone would buy DropBox for $19.10 today, and it's giving employees with options false hope that they would get that amount. [0] http://graphics.wsj.com/tech-startup-stocks-to-watch/ http://graphics.wsj.com/tech-startup-stocks-to-watch/

neals 10y ago

So what happens if the company goes public?

aphextron 10y ago

"a market for trading shares of private companies" So... the stock market? How can this possibly be legal?