The giants before the IPO are increasing. This company is reaping the rewards
The growing fortunes of a generation of giant startups like Robinhood and Chime have sparked a race to create the largest marketplace for trading stocks of private companies.
One company with an early head start appears to be Forge, a San Francisco-based start-up originally backed by big-name tech investors like Peter Thiel and Tim Draper.
Forge CEO Kelly Rodriques, Forge is the largest of the new venues that have sprung up in recent years to facilitate trading with private companies, including rivals like JPMorgan Chase-backed Zanbato and EquityZen. Forge no longer closed around $ 700 million in deals when he took office as CEO in 2018, but adjusted that volume quarterly this year, Rodriques said in a recent interview.
“We are absolutely the largest in terms of the number of trades, the volume of trades with a larger number of companies, sales and just the sheer liquidity we offer,” Rodriques told CNBC. “We are approaching a billion dollars per quarter of the volume and we will start doing this monthly for the next few quarters.
While private company stocks have traditionally been difficult to trade with startups postponing IPOs for a decade or more, the need for employees and investors to sell their private stocks has increased. This coincided with increased institutional investor demand for pre-IPO stocks. Venture-backed firms were valued at more than $ 2 trillion last year, according to PitchBook data.
This dynamic has led to the rise of Forge and other players hoping to ultimately bring standardization, more data, and easier, faster business to the private market – blurring the traditional lines between public and private.
The growth led by Rodriques has drawn investors who have bet that some players will eventually dominate the emerging market. Forge recently raised $ 150 million from investors, including Wells Fargo and Temasek, the Singapore sovereign wealth fund, according to CNBC. Forge is valued at around $ 700 million as of the latest round of donations and triples its 2018 rating, according to people with knowledge of the situation.
It has also caught the attention of the world’s dominant investment banks. Last year, JPMorgan lured Forge’s Andrew Tuthill to lead the bank’s new private stock trading business, and Goldman Sachs recently recruited a Forge business development director named Jack Fowler to join his own efforts.
Like many of the fast-growing companies listed on its trading platform, Forge is on a steep upward trend, according to the CEO. It was backed by central banks, which sparked trillions of impulses after the coronavirus, spurred public stock markets and forced profit-hungry investors into private companies.
“We have seen spectacular growth over the past three quarters that even exceeded my big projections by 30%,” said Rodriques. “This is a business that will be a unicorn in 2021, given our valuation history and the hundreds of millions of dollars in sales visibility over the next several years.”
Part of this growth results from the acquisition of a competing platform. Under Rodriques, Forge acquired another San Francisco-based platform for trading private stocks called SharesPost last year in a cash and stock transaction valued at $ 160 million. Forge said the combined companies have done more than $ 9 billion in business for nearly 400 private companies.
Now Forge, which recently received approval to act as a single broker-dealer with its acquired company, has 300,000 investors on its platform, the CEO said. About 80% of those users are high net worth individuals, while 20% are venture capital companies, hedge funds, family offices and trading counters at banks, he said.
“This is going to be a race for those who have more liquidity than anyone else in the world,” said Rodriques. “If you’re looking to buy or sell a private stock when you’re not looking for Forge, there is a high chance you’re either selling too low or buying too high based just on the number of names available.” “
Become a smarter investor with CNBC Pro.
Get stock picks, analyst calls, exclusive interviews and access to CNBC TV.
Sign in to start a free trial today.