Even amid a pandemic, there’s a race on to create a powerful, global private securities marketplace where private shares are traded as freely as public company shares on the Nasdaq.
In one lane is Carta, an eight-year-old maker of cap table management software with big ambitions to create a kind of private company stock market, one that the startup tells the Financial Times could debut this summer.
Nasdaq itself is in the race, having acquired in 2015 an earlier broker of private shares called SecondMarket. It has since used its Nasdaq Private Market business to provide software to private companies and investment funds looking to do tender offers or share buybacks.
Now, two other companies that were long competing against one another are joining forces to boost the odds that they can survive and maybe thrive against the others. Pending regulatory approval, Forge, founded as Equidate in 2014, and SharesPost, founded in 2009, will merge under the Forge brand after agreeing to a $160 million cash-and-stock deal. (The companies are declining to share more financial specifics than that.)
Forge’s CEO, Kelly Rodrigues, will run the combined company, while SharesPost’s founder and CEO Greg Brogger becomes an advisor to the company and joins its board of directors.
Forge has raised $109 million to date, including an expansion of its Series B round that helped pay for the acquisition. SharesPost has raised $38 million from investors over the years. The combined company will have close to 200 employees across five offices, including New York, San Carlos, San Francisco, South Dakota and Hong Kong.
If any layoffs are planned, Forge isn’t talking about that yet, with Rodrigues telling us in an email exchange last night that until the deal closes at least, the combined entity will continue to manage “as is,” in terms of people and locations.
He does say he expects that SharesPost — which will contribute anywhere from 25% to 30% percent of Forge’s revenue going forward — will complete the picture, so to speak. While Forge has been trying to make inroads with institutional investors, SharesPost has focused on serving the needs of individual investors. “By coming together, we are able to optimally address the needs of the entire market,” says Rodrigues.
In fact, Rodrigues doesn’t sound remotely concerned about how Forge can effectively compete going forward against Carta and Nasdaq, not to mention other outfits like EquityZen and other players that actively buy and sell secondary shares, like Industry Ventures and Scenic Advisement.
“There will be lots of different models created that try to compete here,” says Rodrigues. “What we know is that who wins will have to have scale; the richest data and most transparency into pricing; and the tech platform to make trading easy, fast and that serves private companies. Forge is way ahead when it comes to all of these.”
Rivals like Carta might beg to differ. Carta was valued at $3.1 billion in a funding round just this month and argues that it is best positioned as a private company marketplace because it already houses data on hundreds of startups that use its platform.
Either way, Forge has strengthened its position as it chases after a market that has ballooned in size over the last decade or so, as fewer companies have opted to go public.
Whether COVID-19 and its abrupt impacts on the IPO market — freezing it overnight and indefinitely — will change that calculation for startup founders remains to be seen.
Certainly, one could argue that Airbnb and its employees might be better positioned right now had it not waited for exactly the right time to become a publicly traded outfit.