A Silicon Valley startup has launched a new blockchain-based trading platform, marking the latest push to open up the high-walled private markets to the masses.
Securitize, whose backers include Morgan Stanley and Blockchain Capital, debuted its own alternative trading system (ATS) on Tuesday—putting it one step closer to realizing its vision for unlocking broad access to what can be lucrative, but sometimes risky, alternative assets.
Founded in 2017, San Francisco-based Securitize currently offers private companies the ability to raise capital through security tokens that are built on blockchain technology, the ledger system that underscores Bitcoin and other digital assets and help issuers to keep better track of who owns their tokens, according to Securitize. So far, more than 200 companies and businesses, as well as nearly 400,000 investors, have used Securitize’s tools.
Now, Securitize is rolling out its newly launched ATS as it looks to provide one of the first “end-to-end” offerings that will allow retail individuals, accredited investors, and institutions to directly trade in anything from the pre-IPO shares of the next big tech company to a real estate project. “Finally being able to, at the tail end of that experience, provide the secondary liquidity just brings the entire puzzle together,” Securitize Markets CEO Scott Harrigan told Fortune.
Private market infrastructure has attracted newfound interest as a business over the past several years.
With trillions of dollars worth of funds available from private equity and venture capital firms, companies have been staying private for longer in recent years than they have historically. The median age for a company that went public in the U.S. in 2020, for instance, was nine years old, compared with six years old in 1980, according to data from University of Florida finance professor Jay Ritter.
Investors in Silicon Valley and on Wall Street have naturally sought out ways to tap into the monumental growth that those issuers are seeing while being privately held. And while shares trading in the public markets are readily available to buy for just about anyone with a brokerage account, private company shares are traded on a hodgepodge network of platforms under a series of restrictions and rules that limit who can own them. So, a group of startups and established players including Carta, Nasdaq, Republic, and Securitize have been working over the past several years to facilitate such investments.
Securitize’s ability to launch an ATS boils out of a late 2020 deal wherein the company acquired broker/dealer Distributed Technology Markets, which was regulated by the Securities and Exchange Commission and the Financial Industry Regulatory Authority. It at the time also acquired Velocity Platform, a money services business that operated in several states.
Unlike some of its peers, Securitize is not narrowing its focus.
The company’s ATS will offer investments that stretch beyond both big and small private companies’ stocks to real estate, cryptocurrency-focused funds, and more. Its hope is that it will be able to create a liquid enough market for each. Accredited investors—that is, the individuals and institutions that meet certain qualifications under U.S. law to invest in private markets and alternative assets—figure to be a key constituency on Securitize Markets. But the company is also hoping to draw casual investors, too. For instance, companies conducting a Reg A offering can raise as much as $75 million from retail investors on Securitize Markets.
Eight offerings are already live on Securitize Markets, with at least five more on the way in the coming days, according to the company. Among the initial batch is an offering from Leveller, which connects investors with entertainment financing projects, and another from a crypto-focused TV show called “Hold On for Dear Life” that is in development by Satoshi Nakamoto Productions and is being produced by Emmy award winner Rob Weiss.
“Liquidity is not a black and white thing,” Securitize CEO Carlos Domingo said in an interview with Fortune. “What we’re doing is not necessarily to replicate the liquidity of the public markets. We know that’s not going to happen for many reasons.”
And while competition is bound to continue to mount in the private markets infrastructure business, Domingo welcomes it, telling Fortune that what is happening today is not that dissimilar to the competition among Internet browsers once Microsoft Explorer’s dominance began to wane.
“We take for granted how the web works today. It was invented when there was competition, and people were inventing new features,” Domingo said. “I hope that’s what happens here.”
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