We are witnessing nothing less than a digital revolution in finance and SharesPost is leading the way.
The company has launched the first compliant security token trade in the United States on our Alternative Trading System (ATS). Our accredited investors can buy and sell tokens issued by Blockchain Capital, the pioneer and premier venture capital firm focused exclusively on the blockchain technology sector.
SharesPost will also soon launch GLASS, the first ever network to allow investors to freely and confidently trade digital tokens around the world. Our Digital Assets Group is already helping companies conduct digital token offerings.
These rapid turn of events are not just the story of SharesPost but of finance. The same forces of populism and distrust of elite institutions unleashed by the Great Recession a decade ago combined with the emergence of cryptocurrencies and Blockchain technology have begun to transform the way companies raise money and how investors make money.
But as much as things have changed, some things have remained the same. In a free market economy, people have always needed capital to start businesses, hire workers, develop products and services, and expand across industries and geographies.
In the early 1600s, the Dutch East Indian Company launched the world’s first IPO. To finance its voyages to Asia, the company came up with the ingenious idea of directly selling shares of itself to the public rather than seek investors to fund individual expeditions.
Nearly two centuries later, a group of brokers formed the early version of the New York Stock Exchange to trade bonds from Revolutionary War and shares in the First Bank of the United States. Thanks to technological advancements over the next 200 years, an increasing number of investors and companies around the world could tap into an increasingly deeper pool of liquidity.
However, the 21st century brought us two severe economic downturns that ultimately demonstrated structural weaknesses in the public markets.
The housing crisis that precipitated the Great Recession in 2008 created a liquidity crisis in the venture world— limited partners were not honoring capital commitments; venture capitalists were not able to raise new funds and private growth firms were starved for capital. IPOs dried up.
SharesPost was founded in 2009 in the same entrepreneurial spirit as the Dutch East Indian Company and those New York stock brokers, united by the common belief that we needed new ways to access capital and liquidity. SharesPost, though, would have one enormous technological advantage that the others didn’t: the Internet.
Web platforms like Amazon and eBay demonstrated startups could create working marketplaces for goods and other transactions without building physical stores. Similarly, we don’t need physical exchanges to create a similar online marketplace for trading stock.
SharesPost solved two problems: the company allowed tech employees not willing to wait for an IPO to find some cash for their shares. And the company helped investors looking to buy a piece of a unicorn—private growth companies worth at least $1 billion—prior to a liquidity event, whether an IPO or acquisition.
The idea of buying and selling shares in private companies might have seemed exotic at the time. Not anymore. The cumulative worth of unicorns recently surpassed $1 trillion, according to CB Insights, thanks to an influx of money from institutional investors, including pension funds and university endowments.
So when you think about it, cryptocurrencies, Blockchain, and ICOs are just a continuation of this story, of this perpetual quest for companies and investors to more efficiently find liquidity around the world through the newest technologies.
Venture capital has long been the financial engine for innovation. But security tokens through Blockchain have offered emerging companies a chance to significantly broaden their potential pool of investors.
In 2017, the aggregate value of all tokens grew to $37.7 billion, a nearly 19,000 percent increase from the prior year. By comparison, U.S. startups raised an estimated $8 billion in traditional financing.
The numbers suggest that token offerings can possibly solve entrepreneurs’ financing needs far more effectively by expanding fundraising approaches beyond existing channels. Entrepreneurs can now use security token offerings (STOs) to access thousands of investors around the world.
Ultimately, though, we’re seeing the emergence of a broad private asset class, driven by a dramatic shift of wealth from the public to private markets.
Securities and Exchange Commission Jay Clayton acknowledged this reality, in which he said this year that he’s exploring ways to allow more investors to access private markets, whether shares in emerging growth firms or security tokens, which can represent units of ownership in everything from startups and venture funds to real estate and even art work.
The SharesPost Marketplace will allow investors to access both. And in doing so, add yet another milestone in a centuries long effort to further capital formation and create wealth for investors.
This report is being published by SharesPost Research LLC, and distributed by SharesPost Financial Corporation, a member of FINRA/SIPC. SharesPost Research LLC, SharesPost Financial Corporation and SP Investments Management, LLC, an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc.
Recipients who are not market professionals or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell, or a solicitation of an offer to buy or sell, any security, and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation, or sale would be unlawful under the securities laws of any such jurisdiction.
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This report does not contain a complete analysis of every material fact regarding any issuer, industry, or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable; however, we cannot guarantee the accuracy of all such information.
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Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk. It should only be considered as a long-term investment. You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice.
Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.
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