EquityZen brings together investors and shareholders, providing liquidity to early shareholders and private market access to accredited investors. Pulse 2.0 interviewed EquityZen co-founder Atish Davda to learn more about the company and what the future holds for the private secondary market.
Atish Davda’s Background
Davda grew up in India and was always told America was the ‘land of opportunity,’ after moving here at the age of 12, he started to see how that was true, sharing:
“I began to see how hard work and innovative thinking could lead to a limitless sky of opportunity. I attended a college where I got to study subjects I was passionate about, and upon graduation, I landed a job at one of the world’s largest systematic trading hedge funds. I eagerly got to work on helping to build quantitative investment strategies that the world’s largest pensions and endowments invested in to generate long-term returns to fund the futures of millions.”
“At that firm, I was lucky enough to work on a project whose goal was to take their successful investment strategy and explore ways to scale it so individuals writing smaller checks might have access. It planted a kernel of interest in my mind. Fast forward a few years when I was an early employee at a marketing technology company ready to propose to my now wife, then girlfriend. To afford the ring, I sought to sell some of my equity in that company. Despite a lengthy search for solutions, I learned that this wasn’t easy to do if you weren’t in the C-suite. Another kernel planted.”
“Despite this promise of a “limitless sky,” I began to see that ceilings existed. Opportunities and tools for wealth creation were mostly only available to the wealthy. If you needed wealth to create wealth, how were you supposed to get wealthy in the first place? I wanted to see what might happen if more people had access to these financial tools, namely investments and liquidity in private companies. It’s a journey I’ve been pursuing for the last ten years at EquityZen.”
The Opportunities & Challenges In Starting EquityZen
How did the market environment in 2013 support the start of EquityZen? Davda explained:
“A decade ago, when we started this business, the JOBS Act had just passed, enabling companies to stay private if they had less than 2,000 shareholders. Subsequently, Reg CF enabled thousands of people to participate in the private market through investing. These regulatory changes laid the groundwork for the need for a larger and more inclusive private secondary market. The macroenvironment further fueled the growth of the secondary market as a 40-year low in publicly listed companies created demand for liquidity from shareholders and demand for access from investors.”
What challenges did you face starting EquityZen? Davda acknowledged:
“Despite the massive market opportunity, building our business began as an uphill battle. The “wild west” of secondaries that surrounded Facebook’s IPO left scar tissue for the management and boards of many private companies. Secondaries were taboo, widely seen as “company unfriendly”. To say the least, it wasn’t the friendliest environment to convince companies about the importance of secondary transactions.”
“Yet while there was plenty of discouragement, we couldn’t shake the feeling that the market needed a better solution. We steadfastly believed that secondaries would benefit employees, investors and private companies themselves. So we carried on and are proud to have overcome these obstacles.”
Favorite Memory
What has been your favorite memory since founding EquityZen? Davda reflected:
“One of the most rewarding things has been watching our team grow. We simply could not accomplish our lofty goals without a team that shows up each day with a drive to improve and serve our clients above all else. In addition to developing their careers, EquityZenners have developed lifelong friendships.”
“Seeing each of them level up and grow in their careers and as people remains immensely satisfying. I am incredibly grateful to our team who has helped us on this mission over the past ten years, including current employees who are building for the next ten and beyond.”
Customer Success Stories
Can you share any specific customer success stories? Davda said:
“Stories of shareholders using their liquidity proceeds to send their kids to college, pay down debt, support family members or buy homes and investors reaping the benefits of successful investments have motivated us to continue on our mission to provide private markets access to a broader group of individuals. These individuals can now vote with their dollars, supporting the businesses and causes they believe in. Ultimately, the access EquityZen provides creates opportunities for wealth creation, and wealth creation allows for the freedom to make choices that align with the future you want to live. This is why we do what we do.”
Differentiation From The Competition
What differentiates the company from its competition? Davda affirmed:
“In the past decade, we’ve seen competition increase as the importance of secondary transactions has been accepted by the market. Private companies who had previously asked us to pause trading in their names now ask us to be preferred providers of liquidity for their stock. Some private companies who were once weary, are now some of our closest partners, realizing the value of EquityZen’s approach as they aim to save time and money while improving employee morale and retention.”
“In a quiet IPO market, the secondary market is all the more important. Larger financial institutions that initially ignored this market are now seeing the opportunity as well. And though our business has grown to serve a broad range of secondary participants, both large and small, we have remained focused on providing the best solutions and lowest minimums to the group most underserved in the private market: individual investors and shareholders.”
“Doing so has challenged us to build a scalable, tech-enabled business that can handle the thousands of individual investors (fondly known as “team little check” by EquityZenners) who come to EquityZen to access the private market. In 2022 we saw our 10,000th $10,000 transaction – a feat simultaneously unimaginable and the very image of our vision when we started back in 2013.”
Growth Of The Secondary Marketplace
What makes the secondary marketplace work? Davda highlighted:
“Every private secondary marketplace serves three stakeholders – the company, its shareholders looking to sell, and the accredited investors looking to make the investment. Like a three-legged stool, if there is an asymmetry in addressing the needs of one of these stakeholders above the needs of the others, the stool won’t stand. If a marketplace is too focused on investors, they may seek to do as many deals as possible, at the detriment to the shareholders and private companies they serve. If too focused on shareholders, there may not be investor interest or interest at a price that’s fair to all parties, while disregarding transfer restrictions that private companies may have in place.”
“If too focused on the private companies, the ability to provide investment access and liquidity at all could be stifled. It’s a delicate balance and any asymmetry hinders the network effect that happens when symbiotic parties come together to collectively have their voices heard and needs met.”
“As the secondary market opportunity continues to grow,the best way to foster that growth is to build trusted relationships across all stakeholders – shareholders, investors and the private companies themselves.”
Private Market Trends
What trends will shape the private markets in the future? Davda concluded:
“While I can’t predict the macro environment, I do believe a few major trends will shape the market. With over 14 million accredited households in the US, there is a huge opportunity to increase access to the private markets. As companies stay private just as long (if not longer) than when we started, the importance of private market investing to drive investment returns grows. While EquityZen has reached the early adopters, we want all accredited investors to benefit from the value creation in the private markets.”
“Broadening access and increasing awareness and education will be core to accomplishing this. We want more people to join the private market movement and hope that future regulations, like the Fair Investment Opportunities for Professional Experts Act, will reduce the barriers to this access. We’ll play our part by continuing to execute on our mission and serve our clients with better products, better technology and best-in-class service as we have for the last decade.”
“For shareholders, I believe liquidity will become an expected perk, like 401Ks, for large private companies. EquityZen has made it easy and efficient for private companies to enable liquidity. Adoption will increase and become a table stake. In tandem, I expect to see an increase in employee activism as employees learn and understand they have a right to act on their shares. This hopefully ends the era of liquidity only for some. Fair and transparent rules for all will become the norm and we’ll be here to support the companies dedicated to fairness.”
“In terms of trends in the private markets, here are some of the latest insights from our team about emerging private companies and 2024 IPO hopefuls.” (2024 IPO Outlook2024 IPO Outlook) (Emerging Private CompaniesEmerging Private Companies)
