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Facebook, Uber, Robinhood: all were private companies at some point. Historically, there has been no way for investors to easily buy and sell shares in private companies. With the introduction of blockchain technology, digital securities, and decentralized financial solutions, the ability to grow the private market is on the horizon. Regulators around the world are rushing to catch up and understand how to protect investors who want to participate in this market. This book reviews the regulatory, technical, and societal challenges to open this asset class to more investors in the future.
Currently, US residents who want to invest in the private market need to have a certain net worth to participate. Under the cover of this exclusive private club is access to investment opportunities, supporting innovation, and extreme risk. As the private market has grown, the types of investment instruments and the complexity of the investment structure has increased significantly. Unlike investing in the public market, investing in private ventures can be complicated and requires an understanding of securities law, tax strategy, and, in many cases, future technology that can only be envisioned by innovative entrepreneurs. The key characteristics of the private market are: • Less company regulation • Limited public reporting requirements, especially for smaller companies • A lack of information symmetry • Only investment professionals, or the ultra-wealthy, can invest (accredited investors) With the changes in technology solutions, the advent of new financial solutions, and a change in the way some founders approach building their companies, these characteristics may change as the private market grows. Dan Gallagher, General Counsel of Robinhood and a former Securities and Exchange Commission (SEC) Commissioner, describes the private market as “a vibrant ecosystem.” Capital is key to growth in a private company, and it can come from various sources — professional individual investors (sometimes called “angel investors”), venture capital firms (VC firms), friends and family, and crowdfunding campaigns. Private equity (PE) is sometimes confused with private company investment. PE firms tend to acquire mature companies and recapitalize and re-organize their targets. PE firms generally aren’t looking to make individual investments alongside other investors. For the purposes of this book, we will mostly focus on non-PE owned companies, although we do discuss liquidity in PE funds. The private market is attractive because investors in privately held companies hope to quickly increase the company’s value, then sell their stakes later through a buyout, trade sale, recapitalization, or listing on a public market via initial public offerings (IPOs).
About the Author:
Carine Schneider, FGE (Fellow of Global Equity) is an experienced and well-connected leader in the private market and global compensation industry with deep experience working in consulting, technology, and financial services. She is the President of AST Private Company Solutions (AST PCS). She was named one of the 100 Influential Women in Silicon Valley by the Silicon Valley Business Journal and one of 17 “Women to Watch” in 2017 by Brown Brothers Harriman Center on Women and Wealth. Carine was formerly the President, Nasdaq Private Market and has been the founder and CEO of Global Shares, CEO of Certent, and Partner at PwC. She has also held senior level positions at Morgan Stanley and Willis Towers Watson. She was the founding Executive Director of the National Association of Stock Plan Professionals (NASPP) and founded the nonprofit Global Equity Organization (GEO) where she is now Chair Emeritus, after serving as Chair for eighteen years. She 103 started her career as Manager of Shareholder Relations at Oracle Corporation where she assisted in the IPO. Ms. Schneider was born in The Netherlands and received her degree in psychology and sociology from the University of California, Santa Cruz. She is a frequent speaker at conferences around the world, including at President Obama’s 2016 Global Entrepreneurial Summit, and has authored various articles and chapters in industry publications. She currently serves as a member of the Board of Professional Business Women of California (PBWC). In 2019, she received the UK ProShare Award for Service to Employee Share Ownership.
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