Democratization
of private assets
of private assets
What is going on?
While stock exchanges are seeing an influx of mass investors, the shortage of promising assets becomes more acute: many tech companies are delaying IPOs. Only 23% of founders of fast-growth businesses are planning to go public in the next 1−3 years, and just 3% in the next 12 months. Founders are not happy with the valuations based on traditional business metrics, such as EBITDA, which do not reflect the real growth potential of the companies. At the same time, businesses are in dire need of funding.
Until recently, only institutional investors could afford and profit off of high-growth assets, such as shares of private companies or alternative lending. But the situation is changing. Technologies are entering the private asset market, making it more transparent and opening up new opportunities for highly profitable investments.
What will happen next?
Scenario 1
Regulators will restrict access to mass investors. The private asset market will be open to only a few qualified investors capable of analyzing fast-growing companies.
Scenario 2
Regulators will be able to find a balance between retail investors' interest in high-return assets and concern for people’s financial safety. Retail investors will have more opportunities, and companies will have access to massive capital.
Limitations
Regulation
In many countries, the legislation restricts the activities of retail investors and transactions with digital assets.
Opacity in financial markets
Private-business investments are highly profitable, but there is little public information about such companies. And besides, what’s available is often not credible. Private businesses are more difficult to analyze.
Liquidity of new instruments
It is unclear whether platforms will be able to turn shares of private companies into competitive assets and to which extent.
Use Cases
Marketplaces for shares of private companies
There are evolving platforms for finding specific stocks in the secondary market. These marketplaces solve the biggest problem of private companies entering the market — finding sellers, who are usually early investors or holders of employee stock options.
Money management tools
Before, high-end financial consulting and money management were only available to people with million-dollar capital and above. Today, the market is democratizing: technology makes professional financial services more accessible to audiences writing smaller checks.
"One-window" investments
We can see platforms for one-stop investing in alternative asset classes: venture capital, art, real estate, legal disputes, urgent business loans, etc.
Yieldstreet
The alternative investment platform provides access to multiple asset classes with a minimum check of $ 500.
The alternative investment platform provides access to multiple asset classes with a minimum check of $ 500.
Funding new business models
Fintech companies like Pipe allow investors to fund fast-growing SaaS developers based on their ongoing subscription-backed profits. Businesses no longer need to sell deeply discounted annual plans to raise funds for development. Instead, they can attract investor funds based on existing annual contracts.
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