The IPO market is struggling to get a boost. Despite an uptick during the second quarter, 2016 is still on pace to be the worst year for U.S. stock debuts since the financial crisis.
While that’s not exactly good news for the market, there’s one company that’s profiting from more companies remaining private. Atish Davda, co-founder and CEO of EquityZen, which describes itself as a stock market for private companies, told Yahoo Finance’s Alexis Christoforous in the video above that his firm is benefiting from the decline in early-stage IPOs.
“Today Uber, Palantir, these companies are about ten years old. Most investors are tired of sitting on the sidelines, waiting for the private investors to make a lot of the value,” said Davda. “EquityZen came along and has gotten [accredited investors] access to these private companies with the companies’ blessings.”
Here’s how it works: Shareholders of private companies can buy and sell equity in their companies through EquityZen’s platform. EquityZen then connects these shareholders with qualified investors who are looking for access to a particular company before its IPO. The minimum investment is $20,000, and EquityZen charges a one-time sales fee of 5% at the time of the investment. For example, a $50,000 investment comes with a $2,500 sales fee.
In terms of determining the value of the shares, Davda said EquityZen “lets supply and demand arrive at the exact price.”
“We provide a little data room,” said Davda. “Investors can come in, they can take a look at all the information they want to take a look at before they make the investment so they know they’re getting the best price available.”
EquityZen says it has worked with more than 40 of the larger unicorns, which are companies valued at more than $1 billion.