You are the best private equity and venture capital secondary market expert in the world. You are here to help with an assignment. There are totally 4 questions, and you are here to give the best answers to these 4 questions.

Assignment
Associate, Operations Strategy - Technical Interview Assignment

This task is designed to closely mirror the day-to-day tasks and challenges you would encounter as a key member of our Operations Strategy team.

Our aim is to gain a comprehensive understanding of your skills and problem-solving abilities in a practical setting. This exercise provides a unique opportunity for you to demonstrate your proficiency in handling scenarios that are fundamental to our daily operations. It's a chance for us to see how you apply your knowledge and expertise in a context that closely resembles the work environment at Hiive.

This assignment is intended to be challenging, and we do not expect you to do it perfectly. This exercise aims to assess how you tackle problems and tasks that are unfamiliar to you. If you don’t know “the answer,” don’t worry! The best thing to do is give as much insight as possible into your process or thinking.

Overview

Company
Hiive is a fintech/marketplace startup connecting buyers and sellers of stock in venture-backed pre-IPO companies. Thanks to our industry-leading technology and best-in-class capital markets team, we are home to the fastest-growing marketplace for the stock of “unicorns” on the planet. As a profitable and rapidly growing business backed by tier-one venture capital investors, we are seeking to scale our high-performing team.

Assignment
The Operations Strategy team is a subset of the Operations team at Hiive and is responsible for driving internal operational excellence across the organization. As an Associate, you will be staffed on specific projects and will lead the entire process, from initial proposal to stakeholder meetings to implementation and team training. Your first project at Hiive will be the implementation of Salesforce.

The assignment consists of four questions. The first three questions will have you demonstrate your understanding of Hiive and how you break down complex information into usable data. The final question will allow you to demonstrate how you will use the information provided in a strategic way. Feel free to make any assumptions you think are necessary and state them in your response.

Q1: What user segments would you create out of Hiive’s customer groups?

Q2: What essential fields and critical information would you capture in a CRM system for each user segment you've identified?

Q3: What are the relationships among the customer groups and user segments you’ve provided?

Q4: Using your findings from the previous questions, propose an initiative to boost investor activity on the platform. You may include but are not limited to, proposed messaging, SalesForce tools used, criteria for identifying investors, steps taken to execute the initiative, and methods for measuring success.

Resources
Hiive Customer Groups:

Issuers

Investors

Sellers

Salesforce Tech Stack:

Sales Cloud

Sales Engagement

Sales Dialer

Submission

Associate, Operations Strategy
Location
Onsite - Vancouver, BC

Type
Full time

Department
Operations

Compensation
Compensation CA$100K – CA$140K • Offers Equity
For this role, the estimated base salary range is listed above. The actual base salary will vary based on various factors, including market and individual qualifications objectively assessed during the interview process. The listed range above is a guideline, and the base salary range for this role may be modified.

Overview
Application
Named #4 startup in Canada for 2024, Hiive is a fintech/marketplace startup connecting buyers and sellers of stock in venture-backed pre-IPO companies🚀. Thanks to our industry-leading technology and best-in-class capital markets team, we are home to the fastest-growing marketplace for the stock of “unicorns” on the planet. As a profitable and rapidly growing business backed by tier-one venture capital investors, we are seeking to scale our high-performing team.

As an Associate, Operations Strategy at Hiive, you will play a pivotal role in driving internal operational excellence across the organization. This is a high-impact, fast-paced position, ideal for someone who thrives in improving processes, solving operational inefficiencies, and implementing scalable solutions. Your work will span multiple departments and you’ll lead projects aimed at optimizing workflows, streamlining processes, and enhancing overall efficiency within the company.

In this role, your responsibilities would include:

Collaborate with the Capital Markets, Execution, Finance, and Marketing teams to design, implement, and improve systems and processes that align with evolving business needs.

Develop and implement sales, product, or business strategies that address complex business challenges, with a focus on driving exponential growth and operational efficiency.

Analyze current operational processes, identify bottlenecks, and recommend solutions to enhance productivity and efficiency.

Contribute to the development and documentation of best practices, standard operating procedures, and internal policies.

Required Skills:

Bachelor’s degree or college diploma in a relevant field (e.g., Business, Commerce, Economics) with a strong academic record.

Strong technical aptitude and ability to quickly learn and adapt to new software applications, systems, and processes.

Interest in venture capital, startups, and private equity, with an understanding of the unique challenges faced by high-growth companies.

Highly organized, detail-oriented, and efficient, with a strong ability to manage and process large datasets, including data import/exports and migrations.

Collaborative and flexible team player with excellent interpersonal skills.

Process-oriented and open-minded, with a strong desire to iterate, optimize, and continuously improve systems and workflows.

Ability to combine business context with analytics to diagnose problem areas and develop customized, impactful solutions.

Preferred Skills:

2-4 years of experience in management consulting, investment banking, or startup Strategy and Operations/BizOps roles.

2+ years of experience working with Salesforce or other CRM systems.

Strong communication and presentation skills, with the ability to distill complex, ambiguous topics into clear and compelling narratives tailored to different audiences.

Experience with Python, SQL, or Apex for data analysis and process automation.

Compensation, Benefits & Perks:

Highly competitive salary commensurate with experience and contribution.

Opportunity to participate in ownership of a rapidly growing early-stage startup through our employee stock option plan.

Comprehensive 100% employer-paid health and dental premiums, a health and personal spending account.

A dedicated desk in our Vancouver, BC HQ, in the heart of downtown, with a fridge stocked with healthy snacks and drinks, an onsite gym, and a gorgeous rooftop amenity.

Enjoy a $20-per-day commuter benefit for every day you work in our Vancouver HQ.

An engaging social calendar, including bi-weekly catered lunches, bi-weekly “Friday bar,” team workouts, annual summer party, and holiday party, two “onsite” all-team retreats each year, semi-annual team-building events, and Hiive Womens’ Network events.

Significant opportunities for growth into team leadership and management roles.

Entrepreneurial culture and a small and dynamic team.

Sponsorship, immigration, and relocation for exceptional candidates.

Hiive is committed to fostering an inclusive workplace where all individuals have an opportunity to succeed.

Meet the team redesigning the VC secondary market.
Our Founders

Sim Desai
Sim Desai

Founder & CEO

Prab Rattan
Prab Rattan

Co-Founder & CRO

Sarah Huggins
Sarah Huggins

Co-Founder, COO & General Counsel

Stuart Eccles
Stuart Eccles

Co-Founder and CPTO

Hiive is founded by former principals of one of the world's leading incumbent brokerage firms in the private equity and venture capital secondary market.

Our aim in designing Hiive was to preserve as many of the established best practices of brokers in the global pre-IPO secondary market, while eliminating the opacity and uncertainties traditionally associated with private market trading.

“Our mission is to unlock the value of the private market.”

Designed and built by global leaders in secondary trading.

Investing in private unregistered securities is highly speculative and entails a high degree of risk. These securities are inherently illiquid and there is no guarantee that a market will be available for them. Accordingly, investment in these securities is appropriate only for those investors who can tolerate a high degree of risk, can withstand a total loss of investment, and do not require liquidity of their investment.

Maintain and strengthen your cap table, on your own terms.
On Hiive you cover all your bases. Secondary liquidity in a compliant platform. Control over key parameters. Effortless transaction execution. All at absolutely no cost.*

Most active securities on Hiive

View all companies ->
SpaceX
xAI
Databricks
Ripple Labs
Anthropic
Kraken
Anduril
Attentive
ThoughtSpot
Flexport
Tanium
Consensys
SpaceX
xAI
Databricks
Ripple Labs
Anthropic
Kraken
Anduril
Attentive
ThoughtSpot
Flexport
Tanium
Consensys
Find your company on Hiive

Search company name
Liquidity for your shareholders.
Peace of mind for you.
Reward your most valuable stakeholders, at no charge
There is no charge to the issuer on Hiive. And when you collaborate with us, your shareholders will automatically benefit from significantly reduced transaction fees. to learn more about partnership options.

Manage your market with Hiive
With Hiive, you can pre-approve who buys, who sells, and how much. You can also create trading ranges and windows. You make the rules, and we take care of the rest.

Enjoy seamless transaction execution
Secondaries are no longer a distraction with Hiive. Forget about cumbersome formal secondary processes, and leave it to us to complete all the steps to get the transaction closed.

Access a compliant venue

KYC, AML, and suitability checks on all customers

FINRA member and SEC regulated ATS

Communications archiving and retention

Institutional and accredited investors only

Simplify your cap table
Hiive can help you streamline your shareholder base. We coordinate batched secondary transfers between many sellers and a single buyer. Reluctant to add new lines to your cap table? Hiive Funds can provide liquidity without transferring shares to new investors.

Expand your investor pool
Looking for new, high quality investors at no cost? Use secondary transactions to tap the more than 1,000 institutional funds registered on Hiive. We will deftly manage investor demand generation; from sourcing, to vetting, to closing.

Don’t just take it
from us
We’ve worked with some of the largest
pre-IPO companies with incredible results

"The deep pool of buyers on Hiive ensures that there is always a bid for our stock when liquidity needs arise amongst our investors or employees."

Renaud Leplanche

CEO, Upgrade

Your shareholders will thank you.

Got a question?

ake the friction out of secondary trading.
With a live order book and bona fide quotes on thousands of private stocks, we give you unparalleled market transparency and complete anonymity.

dashboard
Most active securities on Hiive

View all companies ->
SpaceX
xAI
Ripple Labs
Databricks
Anthropic
Kraken
Anduril
Attentive
ThoughtSpot
Flexport
Tanium
Chainalysis
SpaceX
xAI
Ripple Labs
Databricks
Anthropic
Kraken
Anduril
Attentive
ThoughtSpot
Flexport
Tanium
Chainalysis
Discover over 2,000
Pre-IPO Companies

Search Pre-IPO Companies
Capitalize on our unparalleled market coverage.
Anonymously access the fastest growing marketplace for private securities in the world.

Get instant price discovery across hundreds of securities

Observe current and historical market dynamics across a variety of sectors, all in one place. See all live listings and bids for a given stock to get a better sense of market depth on both sides of the trade.

bid
Remain anonymous until you are ready to transact

On Hiive, you are anonymous unless and until you reveal yourself to the other side. Discreetly place orders to buy or sell without sharing your identity until you’re ready.

message
Deal direct with your counterparty

On Hiive, you can make, accept or negotiate an offer directly with the buyer or seller. Our security specialists are still there to help your bid get seen, without getting in between.*

transaction progress
Execute seamlessly

Intuitive bidding, direct messaging, standardized agreements and funding arrangements. Hiive gets you to the finish line in a fraction of the time.

Here's what your peers
have to say.
With over 1,000 registered institutional customers, Hiive is the go-to platform for sophisticated venture investors.

"Hiive is purpose built as a private stock marketplace and as a platform for transaction execution."

Ira Simkhovitch

Managing Director, Industry Ventures

Selling shares has never been this easy.
Search pricing, connect with buyers, and accept an offer in a few simple steps. Plus, get expert help from our Security Specialistsᵅ when you need it.

Most active securities on Hiive

View all companies ->
SpaceX
xAI
Databricks
Ripple Labs
Anthropic
Kraken
Anduril
Attentive
ThoughtSpot
Flexport
Tanium
Consensys
SpaceX
xAI
Databricks
Ripple Labs
Anthropic
Kraken
Anduril
Attentive
ThoughtSpot
Flexport
Tanium
Consensys
Find your company on Hiive

Search company name
Looking for liquidity?
You’re in the right place.
Join thousands of shareholders who have successfully sold on Hiive. Get access to a deep pool of buyers, while staying completely anonymous. Accept a bid and we’ll take care of the rest.

Get instant price discovery
Enter our marketplace to see what prices other sellers are asking for, and what buyers are willing to pay. Get the facts you want, without the spin.

Stay anonymous
Discreetly entertain bids from buyers without sharing your identity until you are ready to connect. Be confident that your personal information is protected.

Enjoy fixed and transparent fees
No hidden charges, no surprises. Get certainty on your fees before setting your price.

Let us bring it home
Strike a deal and leave the rest to us. Our experts manage every step of the process until the cash is in your hands.

Features

Free access to historical trading data

Observe other active sellers

Negotiate and deal directly with buyers

Industry-leading automation

Handles transaction execution and closing

Leading brokerages

Ask these sellers what
they think.
Shareholders across hundreds of companies have used Hiive with incredible results.

"If you are a tech employee in a privately-held company and are looking to access liquidity, I highly recommend Hiive. They have an outstanding platform and team."

Amber Fehrenbacher

Former Director of Marketing, EquipmentShare

Product Guide: Seller Interface
Quickstart

Product guide

Sellers

Product Guide Seller Interface
Expanding access to the secondary market
Hiive makes the process of selling your shares easier and more transparent than ever before. We are excited to announce the launch of an exclusive portal for employees like you who are looking to sell your shares, regardless of your accreditation status. Now, whether or not you are an “accredited investor”, you can easily create a Hiive account, discover the current and historical market for your shares, and sell them when you’re ready.

Putting you in the driver's seat
One of the core features of the platform is that it’s self-directed.

We’ve simplified the process of selling shares, enabling you to independently navigate the market and engage with potential buyers at your discretion. Unlike legacy secondary marketplaces which require you to work through a human broker to understand the market for your shares and identify a suitable buyer, we’ve made live market data accessible to all users, and enable you to engage with all active buyers for the stock you hold. While we stand ready to support you should you need further assistance, we’ve given you the tools to make an educated decision and kickstart the process on your own. Selling your shares has never been this easy.

Making sure the Seller Interface is right for you
We designed the Seller Interface primarily for current and former employees of startups who may not currently qualify as an accredited investor in order to buy private stock. If this is you, then select “Seller Only” during the sign-up process when you arrive at the user profile page.

Hiive user profile selection
If you are an accredited investor and are potentially interested in buying and selling shares, you can select 'Individual Investor'.

Seller Interface overview
Once you make a Hiive account as a seller, you’ll be asked to specify up to 4 companies in which you hold shares. You will then be able to view all the company pages associated with the shares you own. We’ve given you the ability to view information about the company alongside a live snapshot of the current market pricing for the security. You can also view a historical record of how the price for that company’s stock has changed over time, and the prices at which previous transactions occurred. To switch between companies, simply click the dropdown menu in the top left section of your Dashboard. When you're ready, we've given you several options around initiating a sale process.

Accepting a standing bid
The fastest and most direct way to sell your shares is to accept a standing bid on Hiive. A standing bid is a posting by a buyer on the platform that indicates a price and number of shares they are willing to buy now, without any further negotiation.

On the main dashboard for your company, all relevant standing bids will be visible to you. You are also able to click into any of the standing bids to view more information about it, such as the minimum number of shares that the buyer is looking for.

When you find a standing bid offering a suitable price, and are selling at least the minimum number of shares, you are able to directly accept the buyer’s standing bid. This will start the transaction process and you will be prompted to sign an initial agreement between you and the buyer. Alternatively, you can message the buyer directly on the platform if you want to ask any questions about their bid.

Creating a listing
The other way to sell your shares is to create a listing. If none of the standing bids interest you, you can create a listing for your shares where you can indicate the number of shares to sell, and the price you’re looking for.

Once you’ve placed a listing, all relevant buyers will be automatically notified and they will be able to bid directly on your listing. If you receive a bid, you can either accept it, or counter the bid with a higher price before you move ahead with the transaction.

Sell Pre-IPO Shares
Sell your pre-IPO shares of private companies on Hiive, a transparent marketplace for private stock. Skip high brokerage fees, and connect with buyers directly. Our experts are here to help if you need it. Learn more

Please read this important legal notice and disclosures

The information presented in this media is provided for your informational purposes only and does not constitute an offer by Hiive to buy or sell, or a solicitation of an offer, or a recommendation, to buy or sell, any security. Hiive is not, by this media, providing financial, business, investment, legal, tax or other professional advice nor should this media be the basis for making any decision that may affect your financial or other interests. This media does not constitute a prediction of future events or performance. This media is not a research report and commentary contained herein should not be considered to be research. The information in this media, some of which may have been obtained from third-party sources, is provided on an “as is” basis. Hiive does not guarantee the accuracy or completeness of information in this media and does not assume any liability for reliance on the information provided herein. © The Hiive Company Limited 2024. All rights reserved. Reproduction prohibited.

Find Hiive on BrokerCheck. Before you work with Hiive you should review the Form CRS and these important disclosures. Any references to “Hiive” are to The Hiive Company Limited and Hiive Markets Limited.

Related guides

When you want to buy stocks in a public company, you can (generally) just log in to your brokerage of choice, make a few clicks, and voilà—you’ve got equity. But if buying on the public market feels like a walk in the park, then investing in the private market can often feel like a marathon without directions or a map.

If you’ve even taken a cursory look at what’s available in the private market, you’ll notice that one big difference between the public and private markets is how you get access to equity. In the private markets, you might participate in startup fundraising rounds, buy stock directly from existing shareholders, become part of a venture capital fund, or get into private equity.

Another is investing via a SPV.

You may have heard of SPVs—short for “special purpose vehicles”. You might understand the basic idea: that you buy into an investment vehicle and then buy shares in a company. You might have also heard that SPVs are somehow ‘worse’ than direct investing (this is a common rumor).

But is that true? What are the implications of investing via a SPV? How does it compare to other options, especially direct investing?

We know this can all seem intimidating. But when you get down to it, it’s not so complicated. In this guide, we’ll explain what SPVs are, how they work, and when you might and might not want to use them.

What is an SPV?
In a nutshell: An SPV is a vehicle formed to allow a group of investors to pool their capital. Typically this pool is then used to make a single investment in a specific company.

Before putting your money into the SPV, you’ll already know what company it’s investing in—so you can choose SPVs that are investing in the companies you want. In that way, investing via an SPV is more similar to direct investing than to, say, joining a VC fund, where the fund makes multiple investments, and you don’t have any say in what those investments are.

What does an SPV do?
SPVs are formed by people who know they want to invest in a specific company. The SPV then collects money from accredited investors. All capital is called upfront before the investment is made.

When you invest in an SPV, you become a ‘member’ of that SPV. Each member in the SPV has a ‘membership interest’ corresponding to the size of their investment. So if you put $5,000 into an SPV that ultimately raises $100,000, your membership interest is 5%.

Once the SPV has raised its full amount, it sends the money to the seller from which it is purchasing shares. After that, as far as the target company is concerned, the SPV is just like any other investor on its cap table.

On your end, too, your SPV investment functions much like any other investment because SPVs are ‘pass-through vehicles’— which means that gains and losses are passed through the SPV to its members in proportion to their membership interest.

What does that look like in practice?

Successful exit: If the startup has a successful exit (acquisition, merger, or IPO) at a price higher than what the SPV paid for the shares, the SPV will receive proceeds in the same way that any shareholder would. Those proceeds are then passed through to the members in proportion to their membership interest, and members each pay their own capital gains or other applicable tax. So, if the company your SPV invested in doubles in value between the sale and the exit, your $5,000 will turn into $10,000.

Liquidation event: If the startup has a liquidation event that is not a successful exit (e.g. bankruptcy, restructuring, or major asset sale), and the SPV has a liquidation preference that allows it to get some of that payout, you may get back some amount that is less than your original investment—again, in proportion to your membership interest. Or, like with any startup investment, if the company’s liabilities exceed its assets at the time of liquidation, you won’t get any money back.

What is an SPV, legally?
SPVs are set up as legal entities, most commonly LLCs. LLC stands for ‘limited liability company’, because the members of the LLC—in this case, the investors in the SPV—aren’t held personally responsible for the LLC’s debts or liabilities. That means that when you invest via an SPV your downside risk is generally limited to the amount of money you put in: generally, the worst that can happen is that your entire investment goes to zero.

Every SPV has governing documents that lay out the terms of the SPV, covering things like voting rights, fees, and more. No two SPVs have the exact same terms.

The terms of the SPV are set by the ‘SPV organizer. This is the person or firm that sets up the SPV, sources the target investment, works with investors in the SPV, and acts as the point of contact with the company you’re investing in.

Why should I use an SPV?
SPVs let you access more opportunities
Private investment opportunities often have a high minimum transaction size that most accredited investors can’t meet on their own. This is especially true for later-stage investments, since later-stage companies have typically reached higher valuations.

High investment minimums make good sense on the company’s side— when a startup is fundraising, accepting small checks would cost them extra in legal fees, not to mention being an administrative burden. Private companies also want to avoid having a large number of shareholders. But as an individual investor, high minimums often mean you’re shut out of deals.

SPVs have lower investment minimums
High investment minimums make it harder to diversify your portfolio—which is a big problem when you’re investing in startups since most startups fail. Depending on your goals, some of the existing minimums might be a lot of money to invest in a single company, and you might feel that money would be better spent hedging your bets across a range of other investments. But all else equal, you’d still like to have exposure to big-name private companies. So what can you do?

With direct investing, you often only have two options: make a big investment or don’t invest at all. SPVs offer a third option. With an SPV, you can get exposure to high-valuation private companies with a significantly smaller investment, like $25,000.

SPVs are more attractive to companies
If you could pool your money with other investors in an SPV, the SPV can buy more shares than you could buy on your own. That makes the SPV a bigger and more attractive investor to the target company, which means it can secure better deal terms and have a higher likelihood of closing the transaction. Most importantly, it gives you an opportunity to invest in a company that would otherwise not have entertained an investment from you directly.

What are the downsides of SPVs?
While SPVs can make it easier to invest in private companies, they might not come with all the same advantages as direct investing. Whether the upsides of investing via an SPV outweigh the downsides is ultimately up to you.

SPVs may require additional admin and fees
Once you’ve put your money into an SPV, your investment is strictly governed by the terms you agreed to. That means you can’t withdraw your money, and you may be subject to other restrictions as well.

SPVs can be even less liquid than direct investing
Once you’ve put your money into an SPV, your investment is strictly governed by the terms you agreed to. That means you can’t withdraw your money, and you may be subject to other restrictions as well.

Recap
An SPV lets investors pool their capital to make a single investment in a specific company.

The SPV passes gains or losses on to you, proportional to your investment. In this way, it’s similar to direct investing. If the company’s valuation doubles (from the time the SPV makes the investment), so does your investment (though you’ll also often have to pay some fees to the SPV off the top).

You can get access to opportunities that would not otherwise be available to small investors. Shares sales of major private companies are usually completed in large tranches in the seven figure range. Using SPVs, Hiive allows you to access these opportunities with investment minimums as low as $25,000.

You won’t have a direct stake in the private company. As a member of the SPV, you won’t actually own shares of the target company. You will have an indirect stake in the company.

You might be confused by some of the articles you find that claim to explain SPVs, because they’re not targeted at your use case. SPVs are sometimes used by existing funds or companies for a variety of reasons. But here, we’re talking about how SPVs can work for individual investors like you who are interested in acquiring stock in private companies

SPVs are regulated by the SEC, and there are strict limits on the number of members they can have. SPVs raising more than $10 million can have a maximum of 100 members; all others can have a maximum of 250.

Buying pre-IPO secondaries can be a way to gain early exposure to generation-defining companies— imagine having a stake in Airbnb, Uber, or Robinhood before they went public.

Now, picking the right companies is one thing. And it’s not easy. But if you’re confident in your investment criteria, the real problem is access: secondary shares in private companies are not easy to come by.

Historically, if you had your eye on a private company and wanted to get equity, you’d either have to be a well-established institutional investor or VC, or you’d have to deal with a human broker.

With private secondary marketplaces like Hiive, however, you can buy private stock directly from the existing shareholders, provided you meet certain criteria for income, net worth, or financial sophistication, and are willing to take the risk of this asset class (more on all that below). You don't have to be a major private market investor with connections, nor do you have to go through a broker. Just place a bid. And because you can talk directly to the seller, you know you’re getting the price the seller agreed on— no funny business. More on that later, though.

The rest of this article will discuss navigating the pre-IPO secondary market and how Hiive works.

Why pre-IPO secondaries?
TL;DR: Pre-IPO investing may give you a chance at higher returns than what you’d traditionally see in either public investing or private equity. Also, while pre-IPO secondary market investing is risky, historically, there is a higher probability of you being able to liquidate your investment than if you were to invest in the early Seed or Series A stages.

Why now is the time
Tech companies these days generally stay private for longer than they used to. That means many of the companies pushing at the frontiers of technological advancement are not in the public markets— and won't be for the foreseeable future.

So if you want to ride the growth trends in AI, Web3, and other frontiers, chances are that you only have a limited range of options within the public markets. And because these sectors are so new, there is a decent chance that the category winner isn't a public company yet.

Pre-IPO investing provides access to such opportunities before they become widely known to the broader public.

Why not just participate in fundraising rounds?
Making a Seed or Series A investment is a major gamble, and getting in on those fundraising rounds usually requires connections and experience in venture capital.

Investing later on, though, (imagine after a Series E for a company with plans to go public) gives you a unique opportunity: you can get a stake in a company that is more likely to successfully IPO than an early-stage startup.

There’s also potentially a shorter investment horizon. If you provide seed funding to a startup, the IPO might be a decade or more down the line—if it happens at all. But with companies closer to IPO, there’s a better chance that you’ll see liquidity within a few years. (To be clear, you may never see liquidity at all no matter what stage you invest at; pre-IPO investing is risky at any stage and only appropriate for those who understand and can tolerate such risk.)

Considerations when investing in pre-IPO
Eligibility and suitability requirements
Because private markets are less strictly regulated and carry higher risk, you need to be an accredited investor in order to buy private stock. This requirement exists to protect investors—the regulators wants to be sure that people only invest in private stock if they can afford the potential downside.

To qualify as an accredited investor in the US, you need to meet at least one of the following criteria:

have a net worth of over USD $1 million, not counting your primary residence;

have income of over USD $200,000 (or $300,000 with spouse or partner) for at least the last two years; or

be an investment professional in good standing.

The SEC website has more details on who constitutes an accredited investor. Hiive will also require you to pass “know your customer” (KYC), anti-money laundering (AML), and suitability checks. Other countries outside the US may have other rules or thresholds for who can participate in pre-IPO investing.

Understanding your upside
Buying private stock is not as straightforward as investing in the public stock market, so it’s important that you take the time to understand what you’re buying. You’ll want to consider the company’s valuation, the terms that come with the stock you’re purchasing, and what kind of ownership stake you have in that stock.

Valuation

When you’re assessing the potential downside or upside of pre-IPO investments, one of the most important factors is the company’s valuation. While private company valuations are generally not publicly available, and there is limited financial or other information available either, there are four sources of information that you and your professional advisor (if you have one) could use to get an indication of a company’s valuation:

comparison to similar publicly-traded companies;

the company’s 409A valuation;

the valuation of the company’s last capital raise; and

real-time trading data on secondary marketplaces.

You can read more about each of these factors in our in-depth piece on common methods of calculating the price of private startup shares.

Ownership structures
When buying private stock, you may or may not have the option for direct ownership, i.e. owning stock of the company you are investing in. There are a few different types of investment structures in pre-IPO secondary market investing, and it’s important to consider which one aligns with your goals. Two of the most common investment structures are:

Direct ownership: Owning shares in the company directly is the most straightforward option, and it gives you direct control over the shares you are buying. But direct ownership may not be an option for some companies that limit access to their cap table, and in most cases requires a much larger minimum investment than other options.

Funds (aka Special Purpose Vehicles): Funds allow you to access unicorns at lower investment minimums, because they effectively pool your capital with other investors. With Funds, you're not buying shares of the company directly. Instead, you're buying membership interest in the Fund— and the Fund, in turn, owns shares of the company (or in some cases the shares of another Fund). A Fund investment may be less administratively burdensome to hold than a direct investment because the Fund manager manages the Fund on your behalf and provides you with period reporting and necessary tax reporting. What you give up with Fund investing is direct ownership in the underlying company shares.

Liquidation preferences
When a company experiences a liquidity event— usually via an IPO or acquisition— its shareholders receive their payouts in a predetermined order.

If you have a liquidation preference, you get your share of the proceeds before common shareholders. If the company doesn’t make enough from its liquidity event to repay all of its shareholders, it can mean the difference between getting your investment back and getting nothing.

When buying shares on a secondary basis, knowing whether you’re getting preferred or common shares is essential. If you buy from an investor, you may be getting preferred shares. You'd typically get common shares if you buy from an employee or founder.

Liquidation preferences occasionally come with a multiplier— a 2x multiplier means that the stockholder will be paid double their initial investment before the shareholders behind them in the queue get anything.

Note that there are multiple classes of preferred shares, so people might be ahead of you in the queue. It’s therefore important to understand not only the terms of your own liquidation preference, if you have one, but also the preferences of the share classes ahead of yours, which could mean you end up with nothing on a liquidity event.

Lockup periods
Often, your stock can’t be sold right when the company goes public. Many private stocks have a lockup period, which is the length of time after IPO that you’re restricted from selling your shares— typically between 90 and 180 days. Lockup periods exist to prevent major changes in stock prices and company ownership right at IPO.

The duration and terms of the lockup period impact the liquidity of your investment since a lockup period means you might not be able to realize returns or losses immediately. But if you're not looking to make a quick return, that may not be an issue for you.

If you really believe in the future success of the company, you may wish to hold your stock for longer anyway. After all, many successful companies didn’t peak right when they IPOd: depending on when you bought Facebook stock pre-IPO, selling it within the first 180 days after its IPO could have netted you a loss. Today, however, those shares are worth more than 10x what they were at IPO.

When investing via a Fund, the Fund Manager will usually distribute your portion of the shares to you as soon as the lockup expires.

Managing the risk of incomplete information
Private markets come with heightened information asymmetry. When you’re buying pre-IPO stock, the seller may have an information advantage— since sellers are usually employees or early investors, they’re likely to have insider information that isn’t available to you. This puts them in a favourable negotiating position, and you risk paying more for the stock than it’s worth.

So it’s important that you do your research, engage a professional advisor if you need one, and figure out how much you value the stock, before you decide to buy it. You also need to be in a financial position to tolerate the complete loss of your investment.

But this is easier said than done— while the public stock market always shows you exactly how a stock is valued at any given time, private markets are much less transparent. And since private companies aren’t subject to the same reporting and disclosure requirements as publicly traded companies, they generally publish less information.

So, how can you assess the value of a private company?

If you’re unsure how to value a company based on its limited reporting, you may consider other information as a signal. For example:

If a reputable fund manager or other existing investor is doubling down on their investment in the company, that may be a positive signal, assuming they have access to information that you don’t.

If the securities are held by a fund, and the fund decides to mark them down, that’s a negative signal. If they mark it up, then things may be improving— but the fund might also do this for other reasons, such as to attract investors or improve their own perceived performance.

Sometimes the company sponsors its own buy-backs of shares from employees, and the valuations of these purchases are often reported in the press when they happen, especially in the case of high profile companies like SpaceX and OpenAI. Following industry trends and the company’s revenue reports can also be extremely informative. Many crypto companies (eg. Ripple, Chainalysis, Kraken, etc) disclose a significant amount of information publicly.

Finally, if you’re using a marketplace like Hiive, you can see the price of recent secondary market trades for an indication of what other investors are willing to pay.

Where can I access pre-IPO stock?
Pre-IPO stock can be hard to come by. Traditional brokerage firms or tender offers might make private stock accessible to established investors, but most people will be shut out. Luckily, online secondary marketplaces can connect you with employees or early investors at pre-IPO companies looking to sell, again, provided you meet certain criteria.

Traditional brokers

Traditional brokerage firms can serve as intermediaries for accessing pre-IPO stock. But you may not want an intermediary— if you’re not interacting with the seller directly, settling on a purchase price can become a game of telephone.

These brokerage firms also tend to be hard to find and focus only on institutional investors. Even if they do work with individual investors, traditional brokers often have stringent accreditation requirements and high minimum investment thresholds, making them inaccessible to most people.

Tender offers

Tender offers involve purchasing stock directly from existing shareholders. The company itself often initiates them and third-party firms may facilitate them.

However, tender offers are typically only accessible to major or existing investors in the company. If an individual or family office is able to access a tender offer, it’s typically only via a Fund.

Tender offers are also point-in-time opportunities— the stocks are only available for a very limited time. It’s unlike the public market, where you can decide to buy into a stock anytime.

Private secondary marketplaces

Private secondary marketplaces have similarities to other marketplaces you use regularly. There are buyers and sellers on the platform. Sellers can list their shares, and buyers can make offers. In some of them, you can see historical transaction data and current bids, which tell you how other investors and sellers perceive the value of the shares.

Of course, private secondary marketplaces can’t magic away all the limitations of the private market. Like with any other venues for buying pre-IPO stock, you will still have to deal with limited availability, regulatory constraints, and information asymmetry.

If you’re interested in exploring a private marketplace, and provided you meet certain criteria, you can access our platform called Hiive. Our investment minimum is $25,000— much lower than most traditional brokers.

How things work on Hiive
Anonymity
On Hiive, you can browse the market and post standing bids anonymously. Your identity is only revealed when you message a seller or when your bid is accepted.

Automated matching + direct to counter party
Hiive automatically matches you with sellers.

While Hiive is a broker, it’s different from traditional brokers because with Hiive you can get direct access to your counterparties. If you work with a traditional broker, they act as the intermediary between you and the seller. On a private marketplace like Hiive, you’ll often get to talk directly with the seller and negotiate with them.

Once you have matched with a seller and settled on a price that works, the next step is to obtain approval from the company.

Company approval
Companies and certain other investors may have a transfer approval or Right of First Refusal (ROFR) over the company’s stock. This means that if you agree to buy shares from an employee of the company, the company can veto the transaction or decide to buy the shares in place of you.

Hiive takes the lead in seeking the company’s approval. While we can’t make any guarantees, we’ve already had 170+ companies approve deals that we've brought to them.

Hiive also has multiple direct relationships with some companies that work with us as an official venue for trading. For deals with those companies, working through Hiive may facilitate a more efficient approval process.

Finally, if you are buying via a Fund (SPV), the Fund manager will be responsible for obtaining the company’s approval. You would not need to seek approval for yourself since you are not buying the shares directly.

Share and proceeds transfer
Once you’ve agreed in principle to terms of the transaction with a seller, you will usually sign a “share transfer agreement”. This is a contract that includes relevant details, such as share number and purchase price.

When buying via a Fund, you sign what’s called a “subscription agreement”’ with the Fund. The rest of the process will be relatively straightforward and one that Hiive will guide you through.

Recap
There are various ways to access pre-IPO stock, but private secondary marketplaces like Hiive are a relatively simple way to navigate the process and only require relatively low investment minimums. Provided you meet certain criteria, you can create an account in minutes and start browsing one of the world’s largest marketplaces of secondary deals today.

You’ve heard the startup employee dream a million times by now: join a startup, get equity, help the company grow, then make a life-changing amount of money when the company either gets acquired or has an IPO. And then enjoy your newfound freedom, make a few angel investments, go on vacation, open a local coffee shop… The sky’s the limit.

There is just one problem with that fantasy. It is a long time before most startups make it to IPO or acquisition, if they make it there at all. And while that is sometimes because the company does not succeed, it also happens when the company doesn’t want to just yet—take a company like Stripe, for example, which has been surrounded by IPO rumors for years. It’s not so difficult to wind up at a valuable company that does not have any meaningful near-term plans for an exit.

And just because your startup can wait years for an exit doesn’t mean you can (or want to).

Maybe you want to build your dream home. Create some financial security for your family. Hedge your bets in case you don’t feel good about the company’s direction. Get enough liquidity that you can take a few years off. There are a thousand-and-one good reasons you might want to sell before an IPO.

So, if you want liquidity soon and your startup:

Is valuable enough that your equity is worth something
Does not have plans to exit (IPO or acquisition) in the near future
What do you do?

Welcome to the private market. Selling your private shares of a non-public startup is the tempting alternative to waiting for the mythical IPO. But, if you have ever looked into this, you know it’s a nightmare: a tangled web of confusing options and dangerous financial games. Questions quickly arise, like “Can I even afford the tax burden to exercise and sell?” and “Am I getting the best price for my equity?”. As an employee, it feels like you have less optionality than everyone else.

The complexity of private markets is especially unfortunate because you only get one shot at this. Once you sell your equity, or some portion of it, it’s gone. You can’t just buy back in.

If you want to get liquidity from your equity before your company exits, you’ll want to do this right. The rest of this short handbook will help you do just that—we’ll guide you through the various options available and give you the high-level information you need to know on each.

Note: None of the information below is professional advice. We are not financial advisors. That being said, navigating the private secondary market is complex. Our goal here is simply to make it feel a lot less complex.

Can you sell your shares?
Most startups do a bad job at explaining what your equity actually means, what kinds of shares you have, and what your options would be for selling them. And even if they did explain it to you way back when, with your offer letter, you should revisit all of these details before you make the decision to sell.

One assumption many people make is that if you have equity in a private startup, you can—by default—sell your shares however you want. This is not true. To know whether you can actually sell your shares, try to answer the following questions.

Do you have shares or options? Many startups, especially earlier-stage startups, will likely have granted you options instead of shares. An option is the right to purchase a share of your startup’s stock at a fixed strike price (which is the price you will need to pay in order to ‘exercise’, or purchase, the stock). If you have 40,000 options at a $1 strike price, that means you have the option to purchase 40,000 shares for $40,000.

If you have options, you’ll need to exercise them (read: purchase the shares!) before you can start exploring the private markets to sell your shares. Exercising can be tricky for a number of reasons, like your current cash balance and potential tax implications, but that is a separate can of worms and we’ll cover it elsewhere. If you need help paying to exercise your options, you may want to explore what’s called non-recourse financing (a topic for another day).

What kinds of shares do you have? Later-stage startups and larger companies will often grant RSUs to their employees, which represent the right to receive shares of the company for free. But RSUs, like options, usually have a ‘vesting date’. If your RSUs have not vested yet, you do not yet own the shares and cannot yet sell them on the private market.

You should investigate whether you have double-trigger or single-trigger RSUs. The latter only vest after the company IPOs, which means you will not (for the most part) be able to participate in the private stock market. If you have single-trigger RSUs and they have vested, then you may be able to sell stock on the private market.

Now, assuming you do own actual stock in the company, you’ll need to ask the following.

What is your company’s stance? Your company will have rules about how, and if, you can sell your shares. This may be expressed in the terms of your option agreement, option plan, company bylaws, shareholder agreement, or other relevant documents. Most companies’ documents permit you to sell stock as long as you have the approval of the company that issued that stock.

Some companies also have a clause called the right of first refusal (ROFR). This means that, if you find a buyer on the private market, your startup and/or some of its investors, have the right to substitute themselves for the original buyer and purchase your shares themselves for the same price. If they decide not to purchase your shares, they must let the deal go through. Your startup might have even stricter rules, though, like a complete prohibition on sales without board consent or a full lock-up period that prevents sales for a definite amount of time.

The bottom line is that it depends. Some companies are more receptive to secondary sales than others. If you happen to be a shareholder of a company that is more restrictive, you’ll have fewer liquidity options— frustrating, we know. The good news is, the temperature on selling private stock in startups is slowly changing, and some companies are changing their policies to be more employee-friendly to compete for top talent.

Deciding to sell
You’ve likely heard the phrase “Time in the market beats timing the market,” which usually refers to a philosophy used for investing in public stocks and index funds. This makes sense for public investing, because the market does tend to go up over time, and if you invest in, say, a fund that tracks the S&P 500, this may be a good philosophy.

Selling your startup equity is different. There is no guarantee that your individual company will continue to increase in value over time, and the market forces that determine its value might be out of its control. And, once you sell, you don’t get that equity back—you’ve made your decision.

We can’t tell you when to sell, but we can tell you a few factors to consider:

What are the conditions in the broader private market? If we’re in a difficult market, your startup may be valued lower than it would be otherwise.

How do you, and others, feel about the company’s future? You will (of course) be biased, but you should decide what you think about the company’s short- and long-term future.

What is your intention and urgency for selling? If you want to get equity ASAP for a specific reason, you may consider ignoring everything else and proceeding.

As with selling any equity in anything, though, it is truly impossible to predict when your startup will ‘peak’. And it is also true that some liquidity (in most cases) is better than no liquidity at all.

How much is your equity worth?
Knowing how much your shares are worth is one of the most confusing parts of this whole process. That’s because unlike a public company, where the value of a share is objective and clear, the value of private shares can fluctuate wildly.

It’s a cliché, but your equity is truly only worth as much as another party is willing to pay for it. It does not matter if your startup’s last 409A valuation was $1B if the amount private parties are willing to purchase your shares for values the company at closer to $600M, or $2B. That being said, there are a few ways you can estimate the value of your shares.

Real-time trading data. This is far and away the best way to know how much your shares might be worth, because it is quite literally based on what people are paying for shares of your startup. The best place to get this data is a secondary marketplace, like Hiive. Note that price will also depend on the kind of shares you have. If you are (or were) an employee, you likely have Common Stock. This is normal. If you have Preferred Stock, though, your equity may fetch a higher price—Preferred Stock includes voting rights and improved liquidity preferences, which most buyers like.

Look at public comparisons to your startup. If you have shares of Stripe, look at public fintech payments companies (PayPal, Block, Toast). See what multiple of their revenue they are trading for, then apply this to your own situation.

Look at your company’s latest 409A valuation. A 409A valuation is a third-party evaluation of the fair market value of your company’s stock. Your company likely does one at least once per year. The main problem here is that 409A valuations are not based on actual purchase data, which means they are not gospel.

The valuation of your company’s last capital raise. If your company just raised a Series E at a valuation of $4B, you may be able to use $4B as a benchmark for your share value calculations. This is less reliable the further you get from the fundraise.

Fund markups: Funds that own startup shares will periodically estimate how much their portfolio companies are worth. This information is reported in public filings. This can be another benchmark for your startup’s valuation, but remember that because funds charge based on assets under management (AUM), there is an incentive to avoid devaluing (marking down) startup valuations.

We wrote a guide on this here if you are interested in further details.

What will your tax burden be?
Tax calculations are the point at which the exciting, adrenaline-fueled exercise of dreaming up how much money you’ll make becomes a nightmarish fever dream of confusingly written blog posts and bad advice. We can’t explain every detail here—and you are best off working with an expert when you do sell—but we can help you do the napkin math for a rough estimate.

There are two primary situations you’ll get yourself into. Either:

You are selling private shares you already own, on a marketplace like Hiive, OR

You are exercising and selling shares at the same time, perhaps in a tender offer.

If you are selling shares you already own: Your estimated tax burden, then, depends on how you got the shares you currently have. Let’s break down the four common situations.

You were granted ISO stock options: You likely did not pay tax when you exercised the stock options unless you triggered something called AMT. If you have held your shares post-exercise for at least a year, then you will be subject to long-term capital gains tax when you sell.

You were granted NSO stock options: You have already paid ordinary income tax on the difference between the amount you paid to exercise the shares and the amount those shares are worth based on your company’s most recent 409A. When you sell your shares, if you’ve held them for at least a year, you will pay long-term capital gains tax.

You had RSUs that vested: You paid ordinary income tax on the stock when it vested, and assuming you hold them for at least a year, then you will pay normal capital gains tax on the profit from the sale.

Note: If you are exercising and selling shares at the same time: Then you will most likely pay ordinary income tax on your gains—you will not have held your shares long enough to qualify for capital gains tax.

Consider the above carefully, speak with a tax expert, and decide when (and how) it might make most sense for you to sell your shares.

What are the risks of selling?
The primary risk of selling soon, rather than waiting for an IPO or exit, is that your company will eventually be worth more than it is today—that by selling now, you have picked the wrong time from an opportunity cost standpoint (you have not maximized your return). If your company prefers that you do not sell your shares, this is what they will tell you.

That is only one side of the story, though. By not selling now, you also take the risk that your company will never reach an IPO or exit, that it will decrease in value, or that it does reach IPO but at a lower valuation (meaning your shares could be worth less than they are today). Instacart is a good example: the company had a higher valuation in the secondary market prior to their IPO than the current trading price of the stock. More information in our piece on Instacart’s IPO here.

The other risks are mostly tax-related and personal, or related to selling your shares on the private market. For example, some private market risks include:

Using a broker or marketplace that takes an unreasonably large piece of your sale price.

Selling to a private party for a lower price than other private parties would have paid.

Working with a broker or marketplace that makes the process stressful and difficult.

Some issuers (in this case, the company you have equity in) want to prevent private secondary transfers, so they charge egregious transfer fees. These fees make a transfer practically untenable for small shareholders—and painful even for major shareholders.

The private market risks are mostly (or entirely) avoidable, and we’ll cover how to navigate private markets in the next section.

Finding the right place to sell your shares
If you have made it this far, take a deep breath. A sigh of relief is well deserved at this point, assuming you can sell and feel good about how much you could make. Now, we’ll do a quick dive into the different options you have for selling your shares (and the pros and cons of each).

Tender offers
Your company, or a third-party investor, may make an offer to buy shares from you and other employees, in cash, for a certain price. This is a tender offer. It’s different from selling your shares directly to buyers in a number of ways:

Tender offers are company-led (your company is the one negotiating price and signing the term sheet with the buyer(s), not you).

Tender offers are one-time offers at a fixed point in time.

Your company sets rules about who can sell into the tender.

You may be limited on how much you can sell.

Imagine you’re a carpenter who has been apprenticing in a workshop for a year. Last month, you made a beautiful table. If the workshop you’re apprenticing for offered to buy the table from you (or offered to mediate for another buyer), that would be like a tender offer. If you took the table and went out to find and negotiate directly with buyers on your own, that would be like a one-off private secondary sale. It’s an oversimplification, but that is the fundamental difference.

As for whether participation in a tender offer is a good idea, first consider the ideas you’ve already read in this handbook. Is it a good time to sell? Then, look at the other liquidity options we’re about to cover and ask: Is this the best way to sell?

Traditional brokers
There are a number of traditional brokers who will offer to sell your shares for you and take a percentage cut of the money you make. Well-connected individual brokers (or firms) can do this effectively—they will often have a network of interested buyers ready. The downside you get here is that there’s less transparency and optionality with a traditional broker vs. a marketplace (which we’re about to cover).

With a traditional broker, you have less transparency into what your shares are selling for on the private market and whether you are getting a good deal. Commissions can be high, too.

Private secondary marketplaces
If you want to sell your shares on the private market and a tender offer is either unavailable or unappealing to you, we believe that private secondary marketplaces are by far the best way to sell. Private secondary marketplaces (though highly regulated and controlled) are similar to all the other marketplaces you use on a regular basis.

There are buyers and sellers on the platforms. Sellers can list their shares and buyers can make offers. You can see historical transaction data and current bids, which gives you visibility into what the actual value of your shares might be.

If you are interested in exploring a private marketplace, we run one. It is called Hiive. We would love to talk to you about what selling on Hiive might look like—and see if it is a fit for your goals.

The sale process
Once you have decided where you’d like to sell, it’s time to go through with the actual process. Here are some details on how it works.

Matching with a buyer
Matching with a buyer differs based on how you plan to sell your shares. If you are working with a traditional broker, they will act as the intermediary between you and the buyer. If you are selling on a private marketplace like Hiive, you will often get to talk directly with the buyer and negotiate with them.

Regardless, once you have matched with a buyer and landed on a price that works, you need to go through with the transaction—which means getting approval from the issuer.

Getting approval from your company
Earlier in this handbook, we touched on the fact that your company has rules about if, and how, you are able to sell your shares. In many cases, getting approval from your company means going through the right of first refusal (ROFR) process. This is usually how it works:

You find a buyer with bona fide interest in purchasing your shares

You communicate the terms of the proposed transaction to the company

Your company decides to either exercise their ROFR and match the offer, purchasing your shares directly, or allow the private party to purchase your shares

When people use private marketplaces to find buyers but the company ends up exercising their ROFR, the question often arises: “Why do I still need to give a percentage of the sale to the marketplace if my company is just purchasing the shares directly?”

In this case, it’s useful to remember that the only reason your company is willing to purchase the shares directly is because you have actually found a bona fide buyer—your company can now either let someone they don’t know join their cap table, or they can purchase your shares at the price you found via the broker or marketplace.

Transferring shares and money
The process of getting the deal done can feel complex, but it tends to be straightforward (and can be easier if you’re working with a broker or a marketplace). Before anything actually happens, though, you will have to sign the share transfer agreement—which will include all the relevant details, like share number and purchase price.

Our advice? Never sign something you do not understand. Take as much time as you need to make sure you completely understand the agreement you are entering into and each of its intricacies. Ask an expert for help. You do not want to end up in a situation where you end up losing out (in some way) because a document was confusing.

The rest of the process is straightforward. The transaction closes either with the parties transferring funds and shares directly to each other, or via the broker acting as a paying and/or escrow agent.

Have more questions about the process? Check out our FAQ guide here.

Sell Pre-IPO Shares
Sell your pre-IPO shares of private companies on Hiive, a transparent marketplace for private stock. Skip high brokerage fees, and connect with buyers directly. Our experts are here to help if you need it. Learn more

Recap
Figure out if you have a good reason to sell. Impatience can create a massive opportunity cost (selling at the wrong time could mean you lose out on thousands or millions). Ask yourself why you want to sell now, what your other options are, and whether you are OK with the potential opportunity cost of selling now vs. waiting for an IPO.

Learn about the shares you have. Do you have options? Private stock? RSUs that will vest soon? This will help you figure out your path forward (if you are able to sell).

Know how much your shares might be worth (and how much you stand to make). Your shares are only worth what someone will pay for them, but that doesn’t mean you can’t do some napkin math to have a rough estimate of how much you might make.

Understand the tax implications of a sale. Look carefully at the potential tax burden you’ll face when you sell your shares. Do some analysis, speak with an expert, and determine if there’s a good reason you should wait to sell. For example, if you’d been holding shares for 10 months, you’d likely want to wait for the 1 year mark before selling so that you could pay capital gains tax instead of ordinary income tax.

Find the right buyer. There are a number of ways to do this, but we find that people often see the best outcomes with private marketplaces. Hiive is one of those marketplaces.

Finalize the transaction. Get the paperwork and compliance and order, then sign the documents. Remember—never sign something you do not understand.

What is Hiive?
Hiive is a marketplace for private stock in venture-backed companies. It is a platform for buyers and sellers of this stock to find counterparties for their transactions. Only registered broker-dealers are permitted to facilitate transactions in private securities. Hiive Markets Limited is a US broker-dealer registered with FINRA and the Securities Exchange Commission (SEC), and a Canadian exempt market dealer. Hiive Markets Limited also operates an ATS (alternative trading system) regulated by the SEC.

You can find Hiive’s profile on BrokerCheck for more information.

How do I sell my shares?
If you would like to sell your private stock, you can sign up for Hiive and create a “listing” for the stock you wish to sell. When you create a listing, you choose the number of shares and your asking price. Buyers will then be able to bid on your listing to purchase your shares.

Alternatively, you may find that a buyer has already posted a “standing bid” for the type of shares that you hold. A standing bid is a posting made by someone who is looking to buy shares. You can respond to a standing bid by accepting it (to immediately start the transaction process), or by messaging the buyer to ask questions about their bid.

For more details, read our guide on how to sell your shares on the Hiive.

How do I get started?
It takes just a few minutes to sign up, and you can do that here. If you are only looking to sell shares, you can sign up as a “Seller Only”. If you want to both buy and sell on Hiive, or view the current market for other companies, you can make an account as an “Individual Investor”.

For regulatory reasons, we have to ask all Individual Investors whether they qualify as an “accredited investor” or have a similar status in the country where they live. If you do not qualify as an “accredited investor”, you can still sign up as a Seller Only.

Does Hiive have a minimum transaction amount?
Hiive has a minimum transaction amount of US $25,000. This means that if you want to list shares for sale, the number of shares you post, multiplied by your asking price per share, must be greater than or equal to US $25,000.

Can I sell my options on Hiive?
In all cases, you must exercise your options to purchase actual stock before selling your shares. However, some buyers are willing to help fund the exercise price of vested options as part of a purchase transaction, and some companies are willing to complete a form of “cashless exercise” where the options exercise and sale transaction close one after the other.

In the case of a “cashless exercise”, the buyer sends the exercise cost (and any taxes) to the company, and the net sale proceeds to you. If your stock is in the form of vested but unexercised options, and you need help to fund the exercise price, you should include this detail under “Additional listing notes” when you make a listing on Hiive.

Can I sell restricted stock units (RSUs) on Hiive?
Yes, you can list RSUs for sale on Hiive. However, the unique transfer restrictions attached to RSUs means there are typically fewer buyers interested in your shares and bid prices are generally lower than for common or preferred stock

Why do I need to verify my identity to access Hiive?
We verify your identity as part of our KYC (know your customer) practices to safeguard against fraudulent activity and money laundering. Ensuring the character and quality of our user base is essential to maintaining a world class marketplace experience, and our goal is to ensure that you can trust the counterparties you engage with on Hiive.

What if the shares I want to sell are not listed on Hiive?
Our marketplace boasts over 2,500 tradable companies. These companies typically have a “last round valuation” (i.e. the valuation the last time the company raised money from venture capital investors) of at least US $500 million, and most have a last round value exceeding US $1 billion.

During the sign up process, you will be able to indicate which company you’re interested in selling. If the stock you own is not listed, you will be able to input its name, and our team will review the request.

What if there are no prior transactions or listings/bids for the shares I want to sell?
Just because there are no prior transactions or listings/bids for the company in which you hold shares, does not mean that there will be no buyers for your stock. It simply means that Hiive has not yet facilitated a transaction in that company. In particular, it is possible that potential buyers have placed that company on their watchlist, and are waiting for sellers to make a listing.

In this case, you can make a listing at a price that works for you. Then, any buyers who have watchlisted that company will be notified of the new listing, and they will be able to bid on your listing.

What do I pay to sell on Hiive?
There is no fee to sign up for Hiive, place a bid or listing, or review pricing or transaction data. The only time you pay Hiive is if you complete a sale through Hiive or if there is a so-called “ROFR” (right of first refusal) transaction triggered by an offer through Hiive.

Example 1:
You find a buyer through Hiive, and then you close a transaction with that buyer, or the company or an investor buys your stock through a right of first refusal (aka ROFR) or similar process that was caused by the offer you received from Hiive, we will charge you a transaction fee based on the size of the transaction.

Example 2:
If you find a buyer through Hiive, and then the company blocks the transfer, we will NOT charge you a transaction fee.

On Hiive, only the seller pays a fee in the event of a closed transaction. This simplifies the fee structure, and makes it easier for both you and the buyer to understand the cost of a transaction.

For more information about how Hiive works and how we charge fees, you can review Hiive’s Form CRS. There are also other costs you may incur in connection with a successful transaction matched through Hiive, such as transfer or admin fees charged by the company, legal fees, or taxes.

Am I anonymous on Hiive?
Yes, any listing you make on Hiive is anonymous.

When you post a listing, other users will see pricing and volume information about the listing, along with any notes you include. The number of shares you post will also be rounded for extra protection. However, your name and any other identifying information remains private at this point. Even if you negotiate with the buyer on the chat function, you will remain anonymous unless you share your identity with them through the messaging function itself. Your identity will be disclosed to the buyer after you accept a bid from them, but will never be revealed to other users on the platform from whom you do not accept a bid.

How do I decide what price to list my stock at?
It is up to you to decide how much to list your shares for. However, Hiive contains some information that might help you in your decision, and you will see this information when you create an account and identify the types of shares you hold.

Hiive provides this information solely for informational purposes. It is up to you to make your own decision about the price to sell your stock. All the information and data points on the platform are approximate; they haven’t been vetted, confirmed, verified, or endorsed by Hiive. You should also keep in mind that the market for private stock of one company can vary significantly from one day to the next and one transaction to the next. Before you list your stock on Hiive, you should also read through these important disclosures.

Like more help on how to value your shares? Check out our guide.

How do buyers come up with their price? What if they offer a price that I think is too low?
Buyers may use various tools, methods, and data sources to estimate the fair market value of a stock. They may look at the last round value of the stock, as well as data points on historical transactions, bids, and listings for the stock, if these are available. If they are an existing shareholder of the company, they may have information about the actual performance of the company, such as financial statements. They may even ask you if they have information to share with them. They may also look at overall market levels and trends, industry data or research, and information on other comparable companies.

As a seller, you are not obligated to consider or accept any bid on your listing. It is entirely up to you to decide if and when to sell your stock, and for what price. If you receive a bid that you are not happy with, you can always make a counter offer through the platform, or send a message to the prospective buyer asking them to explain the reasoning for their pricing. In the private markets, there will often be a large “spread” between the asking (listing) price you post and the bid price from a buyer, which can lead to extensive negotiations before any transaction is ultimately agreed to.

Once I agree to sell my shares on Hiive, what are the next steps?
Once you find a buyer for your shares, you will accept a bid and then typically sign a “share transfer notice” or “STN,” which is a provisional agreement or “agreement in principle” signed on Hiive. The STN is typically conditional on any approval rights of the company, such as a right of first refusal (ROFR).

Once this STN is signed by both you and the buyer, our Execution Services team will reach out to help you close the transaction. We have closed hundreds of secondary share sales and will be there to support you through each step.

Typically, it takes between 30 and 90 days (from the day the STN is signed) to close the transaction.

Do I need to ask the company for permission to sell?
No, Hiive will seek the company’s approval on your behalf if it is required.

Whether or not you can sell (or “transfer”) your stock depends on the terms of your option agreement, option plan, company bylaws, shareholder agreement, or other relevant documents. Most companies’ documents permit you to sell stock as long as you have the approval of the company that issued that stock. Some also have a clause called a right of first refusal (ROFR), which means that if you do agree to sell your shares to a third party, the company or other shareholders may step in and buy them from you instead, on the same terms as you agreed to with the original buyer.

Hiive will work closely with you at all stages of your transaction, which includes seeking company approval on your behalf once you have agreed to a price with a buyer.

What if the company doesn't allow transfers?
Some companies have a policy not to approve share transfer requests. If you are aware of such a policy, then please let us know. In rare cases, some company documents or option/shareholder agreements prohibit transfer altogether, without even providing an option for approval by the company. If you are aware that this is the case for your shares, let us know and we will advise you of any alternative options.

There are risks associated with exercising your options ahead of a potential sale transaction. If the company does not approve the transaction, or the transaction is not completed for some reason, you may have to hold the shares indefinitely.

Sell Pre-IPO Shares
Sell your pre-IPO shares of private companies on Hiive, a transparent marketplace for private stock. Skip high brokerage fees, and connect with buyers directly. Our experts are here to help if you need it. Learn more

4 ways to calculate the price of your private start-up shares
VC Secondaries

Quickstart

Sellers

Calculating the Price of Private Shares
As an employee at a unicorn or other pre-IPO, it’s common to receive equity in that company as part of your total compensation.

This begs the question - up until the point where the company goes public or is sold, what are your shares in a private company actually worth?

Unlike in the stock market, where company shares are publicly listed and have a value that is quoted daily, it’s far less clear to startup employees what their shares are currently worth. In this article, we want to shed some light on methods used by investors and companies themselves to determine the value of private company shares.

Method 1: valuing private companies by analysing comparable public companies

One of the most common methods investors use to value private companies is by comparing them to similar publicly-traded companies using financial ratios or multiples based on variables such as revenue, growth, and profitability. For example, if an investor wanted to purchase shares of Stripe, they would analyze similar payment software companies in the public stock market like PayPal, Block (former known as Square), or Toast. If public companies similar to Stripe are trading at a certain multiple of their current revenues, investors may apply a similar multiple to value Stripe shares. This is similar to how a new home on the market may be valued at a certain price per square foot if similar homes have sold at that price recently.

While this is a commonly used method, there are limitations. Even if companies are similar, they are not identical, and several factors can affect a company's valuation, such as market share, growth, and profitability. For example, while it may be helpful for investors to know where Lyft and Uber’s shares are trading in the public market to evaluate a new ride-sharing startup, Uber and Lyft are market leaders, while the new company is unproven. Similarly, the new company may be experiencing exponential growth from a small revenue base, while incumbents' growth may be slower as they mature. Adjusting for these differences is challenging when using this approach to value private companies.

Method 2: looking at 409A valuations

Employees of startups often refer to the company’s 409A valuation as the current “fair market value” of a company’s shares, but this is also an imperfect approach.

Private companies obtain 409A valuations to value the equity that they grant to employees as a form of compensation. Startups typically hire a qualified, independent appraiser like Carta or Scalar to arrive at a 409A valuation. These appraisers develop a detailed report, concluding with the company’s shares valuation. The report takes into account a variety of factors, including the company's financials, the value of any assets or liabilities, the company's growth potential, and current market conditions. Typically private companies must update their 409A valuation annually or with material changes in the business, such as new financing or acquisition, as required by the IRS.

The major drawback of 409A valuations is that they are not based on an actual transaction - i.e. what someone has actually paid for the stock. For this reason, the 409A valuation is open to manipulation and human error and is not a reliable predictor of what someone would pay for the stock today.

Method 3: the valuation of the company’s last capital raise

It’s often said that something is only worth what someone else is willing to pay for it. This is why many view the valuation of a venture-backed company's most recent funding round as a great indicator of its worth. The pricing of the funding round, set by new investors who are impartial to the company and its current shareholders, also ensures an unbiased valuation.

However, the ‘last round value’ suffers from two potential drawbacks. First, it’s established at a specific point in time and may not accurately reflect the current value of a private company’s shares in a rapidly changing market environment, like the one we find ourselves in today. Second, the newest investors usually receive preferred shares that come with a range of special rights that are not attached to the vast majority of the other shares, such as the common shares typically held by employees. For these reasons, the last round value may deviate from the stock’s true, fair market value.

Method 4: real-time trading data

By far, the most accurate indicator of a private company's value is the current trading price of its shares in the secondary market because this is the value at which the shares could be sold today.

At Hiive, we’ve built a marketplace for trading private company shares that enables you to observe the market price for your stock in real time. By signing up, you will join thousands of employees from private companies, as well as institutional and accredited investors. You can monitor real-time buying and selling activity for shares of your company and other pre-IPO companies, such as shares of SpaceX, Reddit, Discord, and OpenAI stock. If you’re interested in knowing what your shares are worth, you can sign-up here or feel free to contact <PRESIDIO_ANONYMIZED_EMAIL_ADDRESS> for more information.

What are VC Secondary Transactions?
If you are a current or former employee of a highly valued startup or unicorn and you’ve decided you can’t wait any longer for an IPO to sell your shares, you’ve probably by now heard the term “secondary transaction” or “secondary sale.”

A VC secondary transaction is when a shareholder of a pre-IPO, venture capital-backed company sells their shares to someone else.

This is different from a primary transaction, where an investor purchases newly-issued shares from the company directly. When companies announce funding rounds, this is a primary fundraise. This is why private VC-backed companies are often referred to as the “issuer.” They sell, or “issue” new shares to investors to raise money to fund their business.

Participants in the VC Secondary Market and their objectives
In a traditional VC secondary transaction, there are three stakeholders: the seller, the buyer, and the company.

Sellers

Sellers in the VC secondary market include venture capital firms, angel investors, and current or former employees.

Amongst venture capital firms and angel investors, the most likely sellers are those who invested at a very early stage in the company’s life, such as at the pre-seed, seed or series A stage. These investors may have invested at a lower valuation, like $10 to $50 million, and the company is now worth $500 million, $1 billion or even more. These investors are sitting on a very large paper gain. As the average VC-backed company is staying private longer than in decades past, these investors may not be able to wait until the company goes public to generate a return. The VC secondary market is a potential opportunity for them to cash in some gains and show their investors a return.

By far, the largest group of sellers in the secondary market are founders, executives, and current and former employees of venture capital funded companies who are typically granted equity as a form of compensation.

Buyers

Buyers in the secondary market can be investment firms or high-net-worth individuals (also known as accredited investors). There are several different types of institutions that are active in the secondary market, including VC funds, so-called secondary funds, hedge funds, family offices, and growth equity firms. Buyers in the VC secondary market can be current or new investors in the target company.

New entrants include wealth management firms and registered investment advisors who view direct investing into venture capital as a potentially attractive way to diversify clients’ portfolios into higher return alternatives to public equities and bonds.

Issuers (companies)

The issuer needs to approve the transfer of shares from the seller to the buyer. The company could also become the buyer by exercising its right of first refusal (ROFR) to buy the shares at the proposed transfer price. In a future post, we’ll dive into more detail on the company approval process, the ROFR, and why some pre-IPO companies have a negative view towards VC secondary transactions.

If you’re a current or former employee or an existing investor of a pre-IPO company, we encourage you to sign-up for the Hiive platform here. Alternatively, feel free to contact <PRESIDIO_ANONYMIZED_EMAIL_ADDRESS> for more information.

The Hiive50 is an equal-weight price index of the 50 most liquid securities on Hiive. The index is generated directly from user orders and transactions on the Hiive platform.

The index is intended to be a barometer for the direction and momentum of the late stage pre-IPO market.

Membership in the Hiive50 is determined by a ranked scoring methodology based on the liquidity scores of all securities on Hiive. Each security’s liquidity score is based on the number and volume of closed transactions in the 180 days prior to the reconstitution date.

Price calculations for individual Hiive50 constituents do not consider the transaction size, share series, or transfer method related to a specific order, accepted bid, or transaction.

Performance

Period Range Change
1 YEAR 85.04 - 109.17 +23.88%
6 MONTH 91.44 - 109.17 +17.60%
3 MONTH 93.11 - 109.17 +15.68%

HIIVE50 Index membership badge
Reconstitution frequency Quarterly
Launch date July 10, 2024
Inception date January 1, 2023

Index Constituents
The Hiive50 consists of the most liquid securities on Hiive. Membership in the index is determined quarterly based on a liquidity score incorporating the frequency and volume of closed transactions in the 180 days prior to the reconstitution date.

Company

Trend (3 month)

Live Orders1

SpaceX
57.2%
304
xAI
332.7%
118
Ripple Labs
49.6%
95
Anthropic
64.3%
74
Kraken
39.6%
57
Attentive
5.5%
46
ThoughtSpot
1.7%
46
Chainalysis
2.7%
41
Epic Games
8.9%
37
Groq
18.2%
37
Scale AI
2.6%
37
Dataminr
2.6%
33
Addepar
9.0%
29
Fanatics
4.9%
29
Harness
6.7%
29
CoreWeave
15.6%
28
LaunchDarkly
0.2%
25
Cerebras Systems
44.3%
22
Dragos
70.7%
21
Lightmatter
199.4%
20
Dialpad
14.0%
18
Nuro
43.9%
18
Stripe
9.9%
18
Discord
8.4%
17
WHOOP
2.1%
17
Chime
7.5%
16
GoCardless
0.1%
15
Liquid Death
5.4%
15
Loft Orbital
18.4%
15
Mercury
11.2%
15
Phenom People
0.2%
15
Postman
0.1%
15
DailyPay
10.9%
13
Redwood Materials
3.9%
13
SambaNova Systems
35.1%
13
Airwallex
2.6%
12
Workato
0.3%
12
FloQast
27.6%
11
The Farmer's Dog
5.2%
11
Kaseya
20.3%
9
Olipop
7.1%
9
Crusoe
3.6%
7
Greenlight
16.2%
7
Outdoorsy
0.0%
7
Vercel
11.1%
5
Animoca Brands
7.3%
4
Lambda
4.1%
4
BillionToOne
0.9%
1
Roadrunner Recycling
2.6%
1
OpenAI
62.4%
0

AI, Crypto Fueling Transformation of Secondaries Market
Q4 2024 State of the Private Market Report

Hiive 2024 Q4 State of the Private Market
Unless otherwise indicated, the data cited within this article is derived from the Hiive platform (the “platform”). Hiive is not affiliated with, sponsored by, or endorsed by any of the companies listed, described, or featured on the platform.

Like public markets, which appear to have been propelled by expectations of AI-driven productivity gains for tech giants, the private markets appear to have been buoyed by the rapidly rising prospects of names like Groq, Anthropic, Cerebras Systems, Lightmatter, Coreweave, and OpenAI, and many others, which have surged as much as 300% in the last 1-2 years.

Unlike public markets, however, which have gained as much as 80% since bottoming around January of 2023 (1), the pre-IPO market overall has been quite tepid. AI-driven gains have been more than offset by weakness across most of the rest of the late-stage venture asset class, resulting in just slightly more than a 10% increase in the Hiive50 Index (an equal-weight price index of the 50 most liquid securities on Hiive)* from its October 2023 lows at the end of Q3 2024. Though many Series C and later startups have begun to stabilize or climb gradually higher, they continue to trade at an average discount of 40% to 45% off their post-COVID highs.

The high rate context continues to be a headwind for cash-strapped startups as VCs pull back to preserve cash themselves in a tough fundraising environment. While this environment poses significant challenges for the ecosystem, lower valuations could also present an opportunity for investors who are willing to accept the risk of entering the market today. If inflation continues to moderate and rates fall commensurately, then prospects for early-stage companies could improve significantly, and valuations could rise.

We are hopeful that our trading technologies will help to bridge the gap between private companies seeking better access to capital and investors seeking better access to opportunity as the pre-IPO market enters this new cycle. Evidence of rapidly rising activity on our platform gives us signals that this is indeed happening, and we are optimistic that this trend will continue in the quarters ahead.

Liquidity is Rising in the Secondary Market
Over the first three quarters of 2024, we have seen several indicators on the Hiive platform that support a clear takeaway: pre-IPO stock is trading more freely. Indicators of activity, such as orders placed on platform and completed transactions, have been accelerating across a broad range of securities.

Hiive 2024 Q4 Private Market Report: Supply & Demand Q1-3
Overall Secondary Market Breadth is Gradually Increasing

Employees and early-stage funds are decreasingly waiting for natural exits, as these traditional liquidity events have become less frequent, with companies staying private for longer. We’re seeing this trend reflected directly in the Hiive marketplace data. Since the beginning of the year, the range of pre-IPO companies listed on Hiive has grown across both the investor and shareholder sides of the marketplace. 95 companies have been newly traded on Hiive in the first 9 months of 2024. On the demand side, the number of companies with buy orders has increased 38% from 362 to 498. On the supply side, the number of companies with sell orders has grown even faster, at 54%, from 760 to 1,176.

Hiive 2024 Q4 Private Market Report: Bid/Ask Spread
Bid/Ask Spread is Narrowing

The delta between bid price and ask price on Hiive, as a percent discount to the latest implied primary investment valuation, has decreased from 14.1% at the beginning of 2024 to 7.1% at the end of Q3. Bids reflect a shrinking discount, and this may be an indication of increasing liquidity. When the bid/ask spread narrows, more buyers and sellers match on the platform, resulting in higher liquidity and transaction volumes.

A Gap Persists Between Private and Public Markets

Hiive Q4 2024 Private Market Report: Hiive50 vs Public Indices, Q1'23 - Q3'24
Hiive Q4 2024 Private Market Report: Hiive50 vs Public Indices, Q1-Q3 2024
Even as secondary liquidity increases, there is a growing delta between the pre-IPO market and public stocks. This disparity is potentially driven by a high interest rate environment and the resulting capital scarcity for speculative businesses that don’t have comparable (or comparatively transparent) revenues and profitability. While the private market has made some progress in 2024, wider change is needed to close this systemic gap.

The Q4 edition of the Hiive50 Shows Strong Performance Among AI, High-Tech Hardware, and Crypto Secondaries
Q4 Hiive50 Constituents Part 1
Q4 Hiive50 Constituents Part 2
Q4 Hiive 50 AI New Joiners

xAI: Led by Elon Musk, xAI has emerged as a major large language model competitor for Anthropic and OpenAI.

Scale AI: As AI applications proliferate, Scale AI's infrastructure solutions for providing complete, accurately labeled datasets have become increasingly relevant.

Dataminr: Dataminr's real-time information discovery platform has been adopted by organizations seeking to stay ahead of emerging trends, risks, and opportunities.

CoreWeave: CoreWeave's specialized cloud infrastructure, optimized for GPU-intensive workloads, has become a solution for companies in the AI, machine learning, and entertainment sectors.

HIIVE50 Private Market Index Schematic
Separated into key industry segments, including AI, High-Tech Hardware, Web3/Crypto, FinTech, SaaS, and Consumer, we can see for the first time a sector-level barometer for the direction and momentum of the pre-IPO market on the platform, as shown in the two charts below.

Hiive Q4 2024 State of the Private Market Report: Hiive50 by Sector, Q1-Q3
Hiive Q4 2024 State of the Private Market Report: Hiive50 by Sector, Q3
The AI Secondaries Segment Continues to Drive Increases in Implied Value

Hiive Q4 2024 State of the Private Market Report: Hiive50 by Sector, Q1-Q3
Hiive Q4 2024 State of the Private Market Report: Hiive50 by Sector, Q3 (AI)
The AI segment was the top performer in the Hiive50, leading the index in Q3 performance and with a 42% increase in the price index over the first three quarters of 2024. This momentum mirrors the overall dominance of AI investment within the startup ecosystem, where AI deals represented 37% of all Q3 2024 venture fundraising (2).

While OpenAI, Anthropic, and Cerebras Systems continued to pace the AI segment as repeat top performers, the sector also included the largest number of new joiners to the Hiive50, further underscoring the AI industry’s prominence within the overall secondaries market.

AI and High-Tech Hardware IPO Case Study: Cerebras Systems

Hiive Private Market Report Q4 2024: Cerebras Systems Pricing
Cerebras Systems, a leader in AI chip technology, has announced its plans to go public in a move that could reshape the AI hardware landscape. Founded in 2016, Cerebras has gained attention for its innovative approach to AI computing, developing larger chips designed to handle the increasingly complex demands of artificial intelligence.

Valuation: Cerebras is reportedly seeking a valuation of $7-8 billion (3).

Funding goal: The company aims to raise up to $1 billion through its public offering (4).

Market positioning: Cerebras is positioning itself as a challenger to established players like Nvidia in the AI chip market.

Technology focus: The company's Wafer-Scale Engine (WSE) is designed to address concerns about the costs and energy demands of AI computing (5).

Cerebras' AI platform combines processors, systems, software, and AI services to deliver acceleration on even the largest AI models, promising to reduce training times, inference latencies, and programming complexity.

The company's decision to go public comes at a time of intense interest in AI technologies, both from investors and potential corporate customers. The success of Cerebras' IPO could serve as a bellwether for the broader AI hardware market and may influence the plans of other AI-focused startups considering public listings.

The High-Tech Hardware Secondaries Segment Has Been the Strongest Performing Sector YTD

Hiive Q4 2024 State of the Private Market Report: Hiive50 by Sector, Q1-Q3 (High-tech hardware)
Hiive Q4 2024 State of the Private Market Report: Hiive50 by Sector, Q3 (High-tech hardware)
Based on data from the Hiive platform, high-tech hardware emerged as the top-performing sector in the Hiive50, with a remarkable 55% price index gain over the first three quarters of 2024. This growth may be influenced by the public markets as industry leader NVIDIA gained 140% over the same period (6). Besides top performers Cerebras Systems (see above) and SambaNova Systems, the industry was also represented in the Hiive50 by Q4 new joiner Loft Orbital, a company whose innovative approach to satellite infrastructure has the potential to democratize access to space-based services.

Web3 Segment Also Outperformed the Overall Hiive 50 Index Year-to-Date

Hiive Q4 2024 State of the Private Market Report: Hiive50 by Sector, Q1-Q3 (Web3)
Hiive Q4 2024 State of the Private Market Report: Hiive50 by Sector, Q3 (Web 3)
Based on data generated from the Hiive platform, The Web3/Crypto segment has been the third-highest performing price index within the Hiive50, gaining 13.3% over the first three quarters of 2024. In addition to repeat high performers Consensys and Chainalysis from the previous quarter, Animoca Brands, a leading player in the blockchain gaming and NFT space, joined the Hiive50 in Q4. Overall, the segment has been growing in favor in the current environment, perhaps driven partly by regulatory reforms, plus the store-of-value potential of Bitcoin and similar assets.

Concluding Thoughts

The pre-IPO market appears to be undergoing a transformation, with increasing liquidity in the secondary market, as observed on the Hiive platform, and a growing number of private companies reportedly embracing secondaries as a viable liquidity option. Hiive’s platform is well-positioned to facilitate this shift, connecting the shareholders in private companies seeking capital with investors seeking opportunities. We are very encouraged by the significant growth in platform activity over the first three quarters of 2024, including a 94% increase in accepted bids, a 76% increase in institutional users, and a 100% increase in active listings. This momentum appears to be driven by a broader market trend towards increased liquidity, indicated by narrowing bid/ask spreads, as observed on the platform. Moreover, the strong performance of AI, high-tech hardware, and crypto secondaries on the platform further underscores the growing appeal of this asset class. Continuing the strong momentum as we approach 2025, we are optimistic about the future of the secondary market and our role in connecting capital and opportunity.

Market Insights
Market Reports
Buyers are coming back

Buyers are coming back
February 2024

In January, the private market began to reflect the momentum that public markets have built over the last 6 months. Moderate gains across bids, listings, and the average transaction price signalled growing optimism across the board. Most notably, the median bid (expressed as a discount to the last round) jumped from 57.2% in December to 49.7% in January, reaching levels last witnessed in 2022. Alongside a notable 30% recovery in the bid/ask ratio from the previous year’s floor in November, one thing is clear— buyers are back in the market.

It may be too early to call an end to the downturn in private markets that began in early 2022, but there appears to have been a rebound in sentiment from the Fall slump that followed a series of disappointing public debuts by late stage startups including Instacart and Klaviyo. That said, spreads remain at cyclically high levels and trading is still concentrated in a relatively limited number of more bluechip names. Notably, the average transaction price (as a percentage of last funding round value) exceeded the median ask in January, indicating room for shareholders of the most sought-after securities to capture better prices in the market in the months ahead.

Meanwhile, the Hiive platform maintained its impressive growth trajectory across all key metrics. The total value of listings on platform reached a new high of $2.69 billion, with over 4,710 orders for private securities spanning nearly 800 distinct pre-IPO companies live during the month.

Marketplace highlights
797

Private issuers with activity on the platform during the month

4,710

Live orders to buy or sell on platform

63.0%

Average transaction price as % of last known funding round

$2.69Bn

Value of listings for sale on the platform

Market momentum
For the first time in more than a year the median bid landed below a discount of 50%, following an eye-catching improvement moving from 52.7% the previous month to 49.7% in January. The median ask registered an increase from the previous month as well, albeit by a lesser extent from December 2023.

The average transaction price also rose in January to 63% of last primary funding valuation, equalling 2023’s high, after improving from 57% to 59% between November and December. Overall, these signs bode well for private company shareholders as buyers finally seem willing to adjust their prices upward. This could be the market rebound long awaited by market participants.

January 2024 Private Market Report: Market Momentum
Bid/ask ratio
February Private Market Report: Jan 2024 bid/ask ratio
At 0.42, the bid/ask ratio remained quite depressed, but continued a gradual rebound from what may have been a cyclical low in November (at 0.32) . Buyers remain in control of the market with roughly 2.5 times more listings than bids on the marketplace.

Average bid/ask spread
February 2024 Private Market Report: January 2024 Bid/Ask Spread
Despite the overall improvement in sentiment, liquidity remained low as the average bid/ask spread widened slightly to 28.3% from 27.9% in December. A marked improvement in the bid/ask spread in coming months would signal a sustainable recovery.

Noteworthy flows
February 2024 Private Market Report: Epic Games Logo
Epic Games was one of the most active securities on Hiive with a total of six accepted bids in January. Not surprisingly, the $1.5 billion capital raise that the company announced on February 7th came at a valuation cut of close to 20% from its prior round in 2022. Buyers remained undeterred, actively bidding for the stock on platform, albeit at a 35 to 40% discount to the new funding round.

February 2024 Private Market Report: Flexport Logo
Flexport sellers placed a total of 37 listings to sell shares on Hiive in January. While the company's stock has been trending downward for almost two years due to serious sector headwinds, it continues to catch a bid on Hiive. Flexport’s shrunken revenues are a cause for concern and its not yet clear whether Ryan Peterson’s return to the helm and a recent $260 million convertible note investment from Shopify will turn things around. While its decision to lay off roughly 20% of its headcount might improve profitability, it may also result in a surge in laid off employees seeking to sell their shares in the secondary market, which could put further downward pressure on pricing.

February 2024 Private Market Report: Klarna Logo
Klarna is making waves with CEO Sebastian Siemiatkowski’s declaration of IPO readiness. The company was one of the most active on Hiive with ten sellers accepting bids for their Klarna shares on platform in January alone. Klarna’s shares are trading 20% higher than in November 2023, potentially reflecting rising IPO expectations.

February 2024 Private Market Report: Postman Icon
Postman, the Indian API platform, was another very active name on Hiive in January with 9 closed transactions amounting to nearly $5 million in volume and peaking at $11 per share (compared with $17.54 at its last funding round). This marks a significant jump from 2023, when the stock attracted limited bidding and traded as low as $6 per share. January saw not only an increase in transaction frequency but also saw a notable improvement in sale values, with the latest transaction closing at a mere 32% discount.

Databricks logo
Databricks, Hiive’s most active stock in 2023, continues to be much more liquid than almost any other stock, with 30 active listings in January. The Data and AI company secured $500 million in its most recent round in September at a $43 billion valuation. Databricks’ ease in raising capital in the private market has mitigated the immediate need for an IPO, prompting shareholders to sell in the secondary market. Here, discounts have hovered around 25%.

February 2024 Private Market Report: Liquid Death Logo
Liquid Death saw three closed transactions at $10.40/sh towards the end of January, implying a valuation of $1.2bn for the beverage company. Since the company’s IPO announcement in July 2023, the price of its shares have trended upwards on Hiive from $9.25 per share in October to the most recent accepted bid of $11.25 in January. Notably, the company is faring better than most of its peers, with its last trade crossing at a 13% discount versus the 37% average discount across all transactions on Hiive.

Hiive vs Forge: Who wins on fees?
Fees

A fee comparison report on Hiive versus Forge report cover image
There are many different brokers of private stock and because the market is so opaque their fees can vary quite dramatically. However, because Forge Global is a public company, we have transparency into their average fees and therefore a unique opportunity to perform a direct one on one comparison between Hiive and Forge.

The chart below illustrates Forge’s total fees as a percentage of their total transaction volume as reported in their public financial statements, compared against Hiive’s total fees as a percentage of Hiive’s total transaction volume (our financials are NOT public, so you will have to trust us that these are correct figures!).

A line chart showing Hiive versus Forge fee comparisons for 2023
What gives?
Clearly, Hiive’s fees are significantly lower. How is this possible in a competitive market?

There's a simple explanation. Hiive only charges the seller a transaction fee, while Forge, as they disclose in their financials, usually charges both the buyer and the seller in a transaction. So while a Hiive seller and a Forge seller may each pay a similar fee (say 2-5% depending on transaction size), buyers on Forge typically have to pay an additional fee on top.

Sellers, mind the gap
You may ask why a seller would care about this since they themselves don't pay more on Forge? The answer is that they really have no choice but to care. Rational buyers in the secondary market will offer an all-in price for a stock, inclusive of fees. Thus, if a buyer sees stock for sale on both Hiive and Forge at the same price (e.g. $25/share), but they have to pay a fee on top at Forge, then it’s pretty obvious where they will choose to transact. The other way to think about it is that a buyer on Forge will reduce their bid to the seller by the amount of any fee that they have to pay to the platform.

Why do the fees move up and down so much?
You may notice in the chart that the fee rate changes quite significantly every quarter for both brokers. Does this mean that Hiive and Forge are constantly changing their fees? Not exactly. It actually reflects that fact that the proportion of institutional sellers (funds) relative to individual sellers (current and former employees of pre-IPO companies) is constantly changing.

Institutions tend to move in and out of the market based on overall market conditions, whereas individuals sell based on their short and medium term financial needs. Because larger institutional sales have lower fees, when more institutions sell in a quarter, the average fee for that quarter goes down.

Resistance (to lower fees) is futile
Fees in the pre-IPO market will inevitably come down for a number of reasons. Competition amongst platforms is rising. Equally importantly, the transparency that modern platforms give to buyers and sellers increases their bargaining power. This is great news for buyers, sellers, and private companies. And, as long as Forge keeps ignoring this reality, it's great news for Hiive too.

Private Stock Market: What Is It and How Does It Work?
Investing in the private stock of a firm that plans to go public might be a profitable strategy.

Taking a controlling position in an operational company or business—the portfolio company—and actively managing and directing the firm or business to maximize its value is a common investment technique used by private equity funds. Other private equity firms may focus on minority interests in fast-growing businesses or startups. Although an SEC-registered counsel may advise a private equity fund, private equity funds are not themselves registered with the SEC.

Private stock market
A private equity fund is a pooled investment vehicle in which the adviser pools the money placed in the fund by all investors and utilizes it to make investments on the fund’s behalf. Unlike mutual funds and hedge funds, private equity businesses often focus on long-term investment opportunities.

Understand private equity and private stock market
PE refers to ownership or interest in a company that is not publicly traded or listed.. A sort of stock given only by a private company to its employees and investors is known as private company stock. Unlike public equities, private stock purchases and sales. Investing in the private stock of a firm that plans to go public might be a profitable strategy.

What is private equity? And how does it work?
Private equity is a type of alternative investment that involves money that isn’t traded on a public exchange. It is a type of investment capital that comes from high-net-worth individuals (HNWIs) and companies who buy shares in private companies or take control of public companies to take them private and delist them from stock exchanges.

Private equity funds and investors invest directly in private corporations or participate in buyouts of publicly-traded companies with the goal of delisting public stock. Private equity carries a risk that is a sort of performance incentive given to private equity fund partners that exceed a certain return threshold. Because the majority of their remuneration comes from the risk, this incentive is intended to link private equity investors with their capital suppliers.
Pros and cons of private equity
Sound investments involve due investigation, whether you’re investing in the public market or using a private equity alternative investment method. Learn more about private equity, including its advantages and disadvantages.

Pros of Private Equity
When it comes to investing in or receiving cash from a private equity business, there are a few benefits:

Raising money for a company or startup is difficult, but private equity firms can offer the cash infusion needed to support a new or struggling company.
Private equity valuations are unaffected by the public market. Therefore it avoids traditional funding methods. A business that obtains capital from private investors will not need to go through a bank or take out high-interest loans to survive.
Allows for greater growth flexibility: Companies that obtain funding from institutions such as venture capital firms may do so earlier in their development, allowing them to experiment with alternative growth tactics to help shape their business.
Cons of Private Equity
For investors and financial recipients, some of the downsides of private equity include:

Requires upfront capital: To invest in a private equity firm, you’ll almost certainly require a significant sum of money. It can be costly to earn a profit, whether you’re trying to assist a firm turn around or stay afloat (which can take years to happen).
It can be a time-consuming procedure: It can take a long time for a business to get the attention of a private equity firm. Established businesses and startups must persuade investors why they should invest in their venture, which can take months of debate or negotiations that may never materialize.
Investors have less control: When an investment firm injects funds into a company, it may be able to make strategic decisions.
How does the trading system work?
A trading system is a set of criteria and rules for buying and selling in financial markets. It produces a statistical analysis of a number of deals and includes previous earnings. Before being labeled as a trading system, this method must pass a set of tests to ensure its success and ability to continue successfully over time. It is made up of algorithms or tweaks that will deliver ‘buy’ and sell signals in order to benefit quickly. Because the market is continually changing and new tweaks to the algorithms or trading system are required, it will never promise a set profit ratio. Markets constantly send forth buying and selling signals. Swing trading, which sustains positions and opens new ones while there is a trend, and intraday trading, which takes advantage of intraday trends and closes any position at the conclusion of the current day, are the most frequent trading strategies.

Features of private equity operations in the stock market
Private equity businesses profit through management and performance fees charged to fund investors. Private equity can take many shapes, from complex leveraged buyouts to startup financing. Following are the features of the stock market:

Acquisition funding – Acquisition financing is money set aside, particularly for the aim of buying another business. A smaller firm can expand its operations by purchasing another company and benefit from the economies of scale gained via the purchase.
Leverage debt financing to buy a company – The authors summarize two decades of finance-based research that significantly qualifies that wisdom. The attractiveness of debt is influenced by corporate and personal tax rates, which vary depending on the scenario. Higher leverage also has hidden costs, such as the limitations on a company’s flexibility in adapting financial policies to strategic goals. The authors present a series of questions for CFOs to ask themselves before establishing a debt policy to help organizations construct an optimal capital structure.
Innovation – The increased demand for digital transformation is nothing new to the private equity business. Private equity firms should make strategic improvements to the companies they invest in to maximize their investments’ value. Digitalization has risen to the forefront of the private equity business as a recognized asset among all the conceivable organizational and operational changes.
Investors benefits – Everyone should participate in investing. It makes no sense not to start investing because there are so many advantages. Another significant benefit of investing is the chance to save money on taxes! Money put into a 401k, SEP IRA, or Traditional IRA, for example, is not taxed in the year it is earned. Instead, you pay taxes on it when you take money during your retirement years. This saves you a lot of money in taxes the year you contribute.
The right use of investment strategy – An investment strategy is a plan created to assist individuals in achieving their financial and investment objectives. Your investment plan is determined by your specific circumstances, such as age, wealth, risk tolerance, and objectives. Value and growth investing are examples of investment techniques that range from conservative to highly aggressive.
How does the private stock market work?
Although private firms can issue stock and have shareholders, their shares are not traded on public exchanges and are not issued through an IPO (IPO). As a result, private enterprises are exempt from the Securities and Exchange Commission’s (SEC) stringent filing requirements. A stock option is a contract that allows the owner the right but not the obligation to buy or sell shares of a company’s stock at a predetermined price by a certain date.

Private business stock options are known as options, and they give the holder the right to buy shares of the firm’s stock at a certain price. The right to buy – or “exercise” – stock options are frequently subject to a vesting schedule that specifies when the options can be exercised.

Businesses commonly issue stock options since they are not recorded as company expenses. Small businesses, such as private enterprises, frequently lack the financial resources to pay potential or high-performing employees compensation commensurate with their larger, publicly-traded counterparts.

Private stock investing explain
Private equity is a type of non-public financing in which firms and investors engage directly in or purchase enterprises. Private equity businesses profit through management and performance fees charged to fund investors. Institutional and individual investors fund private equity, and the funds can be used to support innovative technology, make acquisitions, grow working capital, and boost and stabilize a balance sheet. Limited Partners (LP) normally own 99% of a fund’s shares and have limited liability, whereas General Partners (GP) own 1% of the fund’s shares and have full liability. The latter is also in charge of the investment’s execution and management.

Private equity firms vs venture capital firms in equity investment
Investors make investments in private equity funds for investing purposes. Venture capital, on the other hand, refers to funding for projects backed by new entrepreneurs, which are high-risk and require money to mold their ideas. Individuals or investors invest funds in start-ups or small businesses to launch a new concept and launch a new entrepreneur. All new private enterprises that are unable to secure funding from the public sector can turn to venture capital for help.

This form of investment has considerable risk, but young, well-qualified entrepreneurs back it. Venture capital firms help start-up businesses get off the ground before going public. Private equity and venture capital (VC) invest in a variety of companies of various sizes and sorts, commit varying amounts of capital, and claim varying percentages of ownership in the companies in which they invest.

Do individual investors involve themselves in private equity or venture capital investment?
Limited partnership agreements, which allow investors to invest in a range of venture capital projects while retaining limited liability, are commonly used by institutional and individual investors to invest in private equity (of the initial investment). You can invest in an ETF that tracks an index of publicly traded businesses that invest in private equity. You don’t have to worry about minimum investment requirements because you’re buying individual shares on the stock exchange.

Know private stock exchange rules and regulations before investing
You can invest in fixed deposit schemes, mutual funds, provident funds, real estate, and many other options. However, there is one type of investment that many people have found to be the most tempting. The possibility of high profits is one of the reasons for its appeal. Many people believe that the stock market is a complex beast. The stock market is influenced by so many elements that it is impossible to forecast how it will behave or whether the stock price will rise or fall. The allure of the stock market might lead to significant losses if one is not careful.

Taxation considerations on private equity while investing
Investment fund managers are typically compensated through gain allocations on the liquidation of underlying investment property. These “carried interest” allocations are often treated as capital gains at favorable capital gains rates under current law (currently, at a top rate of 20% as opposed to 37% for non-capital gain compensation income).

Beginning in 2018, the Tax Cuts and Jobs Act (TCJA) increased the one-year holding period for long-term capital gain treatment of carried interest allocations to three years. However, while the QSBS rules apply to capital interests in a partnership, the rules application to profits interests and hence carried interests is less certain. When assessing whether it is tax-deductible, private equity funds and investors should consult their tax professionals.
Private equity vs public equity
Businesses can raise funds and attract investors through a variety of methods. Debt and equity are the two most prevalent alternatives, both of which can be structured in a variety of ways. A corporation might give investors a stake in the company in exchange for a return on their investment as the company grows. For companies and investors, both public and private equity have advantages and disadvantages for companies and investors. When a company goes bankrupt, the stock is usually not a major priority, but equity investors are normally compensated for the increased risk by higher profits. The shareholder’s equity category is used to account for equity in all types of businesses.

How do Private equity trading and Public equity trading work?
Because of public pressure, public equity investors can only work on short-term prospects, whereas private equity investors can work on long-term prospects. Private equity is aimed at high-net-worth individuals, while public equity is aimed at anyone who wants to purchase, sell, or trade these shares.

Organizations regulate private equity less since they do not have to answer public shareholders, but government organizations regulate public equity more because they must disclose information. Private equity investors can trade among themselves or with the general public with the founder’s permission, whereas public equity investors can trade with the general public.

In the investment sector, both private equity and public equity offer advantages. Private equity investors can trade among themselves or with the general public, but only with the founder’s permission, whereas public equity investors can trade with the general public.

How does liquidity affect the private equity market?
Private equity investors can trade among themselves or with the general public, but only with the founder’s permission, whereas public equity investors can trade with the general public. This liquidity premium boosts the value of short-term assets like cash in the secondary market compared to long-term assets like private equity in the primary market. For GPs, this opportunity cost effect may cancel out the liquidity effect’s benefits.

Secondary market buyers of private equity limited partner stakes outperform sellers on average, but the market provides liquidity, allowing sellers to execute portfolio changes that would otherwise be impossible. Investing in private equity funds, which are typically illiquid, comes with significant transaction expenses. Private equity has long been regarded as offering diversification advantages. These gains, however, may be less than expected because private equity is exposed to the same liquidity risk factor as public equities and other alternative asset classes.

What is a private stock market?
Author: Adrian Facini
|
Read time: 7 minutes
Published date: September 24, 2021
CartaX is a marketplace for trading equity ownership in private companies. Learn more about CartaX and private stock markets.

Contents: Why CartaX built a private stock market
What is a private stock market?
At CartaX, we built something new: a stock market for trading private equity.1 We believe it will transform the way private companies approach ownership and capital raising, as well as offer early investors and employees meaningful liquidity from the companies they’ve helped build. To appreciate the transformative potential of a marketplace for private stock like CartaX, it’s necessary to understand how and why the U.S. equities market has evolved to make this innovation possible.

Defining a market
A market is a network that facilitates the pricing and exchange of an asset or service. We’re surrounded by markets: There’s the stock market, but also the bitcoin market, the real estate market, the market for engineers in Silicon Valley, and so forth. Some markets operate under well-defined rules and intentional market structure design, such as the market for Apple stock on the Nasdaq Stock Market, or the market for wholesale electricity on ISO New England’s marketplace. Other markets evolve in response to incentives of their participants, as in the market for elite law firm associates and in online dating networks in the U.S.

There is an important distinction between themarket for a given asset, and a marketplace where the asset is exchanged. While the market is an abstract network, a marketplace is a discrete place or set of electronic interfaces where the exchange of assets or services takes place. One or more marketplaces may be small parts of larger markets. For example, Coinbase and Kraken are two marketplaces that are part of the bitcoin market.

The U.S. stock market includes several marketplaces where short-term traders and long-term investors come together to buy and sell securities, which represent equity ownership in an investment. Traditional marketplaces like the New York Stock Exchange and Nasdaq trade public equities, which include shares of company stock that any member of the public can buy, like shares of Netflix or Amazon. The public equities market is the one that people see monitored on their mobile devices and televisions. But there’s also a market for private equities, which includes shares of privately owned companies, like Carta or Stripe. Private companies do not have reporting requirements and are not listed on a stock exchange, so information about these companies, including earnings, business metrics, trading history, and current market capitalization (i.e., valuation), is not shared with anyone unless the company chooses to share it.

Exchanges vs. alternative trading systems
Financial markets have the good fortune of being well defined. The Securities and Exchange Commission (SEC) is an independent government agency that regulates the U.S. equities market. It provides rules and guidelines that define the market and govern its participants. Each marketplace then defines how it operates within those constraints and how its customers interact with each other to exchange securities. This framework protects investors and helps to maintain fair, orderly, and efficient markets, thus building trust, diversity, and, ultimately, liquidity.

In the Securities Exchange Act of 1934, the SEC defines a stock market with two straightforward criteria. An organization, association, or group of persons is considered to constitute, maintain, or provide a stock market, if it:

brings together the orders for securities of multiple buyers and sellers; and

uses established, non-discretionary methods (whether by providing a trading facility or by setting rules) under which such orders interact with each other, and the buyers and sellers entering such orders agree to the terms of a trade.

Collecting order instructions to buy or sell securities, and then trading them according to a predefined priority and transaction framework that buyers and sellers agree to: Is it that simple to operate a stock market? Yes, and no. Stock markets also come in two principal forms, each with their own regulatory requirements: exchanges and ATS platforms.

Prior to 1998, if a marketplace met the above criteria, the SEC considered it an exchange, which meant it had to register with the SEC as an exchange and follow any applicable rules. This changed as a result of technological innovation: As the stock market became electronified in the ’90s, market operators started to provide trading facilities that met the above criteria, but were not registered as exchanges and did not provide the same level of disclosures and protections that are required of exchanges. In 1998, the SEC acknowledged that the market had evolved by establishing a new regulatory framework designed to “encourage market innovation, while ensuring basic investor protections,” called Regulation ATS. Regulation ATS opened the door to a second way for U.S. stock markets to register and operate, as an alternative trading system (ATS).

Key differences
Stock market operators in the U.S. now have the option to perform the functions of an exchange, but to register with the SEC as an ATS instead of as an exchange. Currently, there are approximately 35 operating public equities ATS platforms, with another 54 that trade private equities, bonds, or alternative assets. In contrast, there are 16 stock exchanges.

Each regulatory framework has its advantages. The SEC gives ATS operators more flexibility to try innovative transaction and fee models, which allows them to respond to changing market conditions with greater velocity. Exchange operators must publish all changes for public comment prior to implementation; they’re also required to provide fair and equal access to all their products and services. In return, exchanges are entitled to collect a share of public market data revenues and have the regulatory authority to enforce their rules on their users.

Both exchange and ATS platform operators must be SEC-registered and each market operator must meet the regulatory requirements applicable to them. Each one defines the structure of its market by establishing the orders it will accept and the rules by which buyers and sellers interact with each other. Through this diversity within a common framework, the U.S. stock market for both public and private securities has developed the capability to adapt rapidly to the needs of market participants. BIDS’s conditional orders, Instinet’s market-on-close benchmark cross, Liquidnet’s negotiation platform, IEX’s speed bump, and IntelligentCross’s artificial intelligence trade optimization are just a few of the innovations ATS operators have introduced as they strive to improve execution quality, minimize signaling risk, and reduce fees for public equities investors.

Innovation and creativity are at the core of the U.S. stock market, which is the deepest, most liquid, and most efficient public equity market in the world. At Carta, we strive to push that kind of creativity forward while focusing on the needs of private companies and their investors. That’s why we decided to take the lead in creating an ATS platform for trading equity ownership in private companies: CartaX.

Why CartaX built a private stock market
CartaX allows select buyers and sellers to trade shares of private companies according to the tailored specifications of those companies. We designed the platform to offer private businesses a way to realize opportunities for liquidity without sacrificing the control and customization enjoyed in the private markets, and without the need for registering as a public company or listing on a public exchange. Founders and executives spend a great deal of time and effort structuring capital raises and tailoring secondary liquidity programs to meet their goals. Replicating this ability to offer customized secondary liquidity programs on a private, scalable, and secure platform was therefore one of our top priorities.

With public equities, marketplaces operate with a one-size-fits-all model for the companies that they trade. The same market structure, disclosure requirements, and shareholder visibility apply to all companies, whether they are an S&P 500 company that trades multiple times per second, or a less well known company that trades only a handful of times per day. Many companies, especially those with lower liquidity profiles, potentially suffer due to a lack of flexibility. Liquidity is spread across more than 50 marketplaces, so there is a visible lack of market depth for companies with low liquidity profiles. This means that it will likely be more expensive for an investor to transact in larger size for these securities, thus potentially perpetuating the lack of liquidity. Meanwhile, companies are still responsible for disseminating rather onerous quarterly disclosures and only receive quarterly information via 13F filings regarding institutional investors that bought or sold their stock.

This is why Carta decided to create a marketplace for trading equity ownership in private companies: We saw an opportunity to put founders, companies, and their leadership teams back at the center of the market by building a private stock market around them. Companies identify each buyer and seller eligible for their market, and set limits on how much stock each participant can buy or sell. The CartaX team created a disclosure framework designed to reduce cost and risk for the issuers of such equity without compromising the investor protections that disclosures provide. Only buyers and sellers approved by the company for their market are able to view company disclosures, place orders, or see pricing information. Finally, the private market aggregates supply and demand, and executes trades only within the range of prices approved by the company.

The CartaX marketplace offers privately held companies the opportunity to leverage liquidity solutions tailored to their unique needs and goals, while also right-sizing the disclosure obligations and providing transparency into and control over the network of institutional and other sophisticated investors buying and selling their stock. In this way, CartaX builds upon the innovations of the past three decades, to deliver a liquidity solution that addresses the needs of today’s private companies, their investors, and their employees.

Hiive is the marketplace for private stock.
The liquidity platform for venture-backed companies and their shareholders.

Hiive50 Index
Updated 3rd December 9:05PM GMT+8

109.07

+9.07%

all time

Jan 23
Apr 23
Jul 23
Oct 23
Jan 24
Apr 24
Jul 24
Oct 24
80
85
90
95
100
105
110
115

The Hiive50 is an equal-weight price index of the 50 most liquid securities on Hiive. The index is generated directly from user orders and transactions on the Hiive platform.

Aggregated share prices are updated daily. Changes are reflective of the past 90 days.

xAI

$59.15

+332.7%

Ripple Labs

$41.82

+49.6%

Anthropic

$63.29

+64.3%

ThoughtSpot

$3.40

-1.7%

The Hiive50 Index is provided for informational and educational purposes only, and is not a recommendation to buy or sell any security. Read additional disclaimers and acknowledgments here.

Join the thousands of companies and shareholders generating liquidity on Hiive.

$100M+

of monthly transaction volume

71%

of US decacorns with at least one trade on Hiive

80%

of tier-1 VCsⁱ work with Hiive

$3B+

of live securities orders

Trade over 2,000 pre-IPO companies

Search Pre-IPO Companies
Hiive is transparent, centralized, and easy.
Buying and selling secondaries the traditional way is a lot of work. Hiive gives you simple and direct access to one central meeting place for qualified participants.

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Discover market pricing
View current and historical data on bids, listings, and private market transactions. Best of all, there is no charge to access Hiive’s massive repository of real-time price data.

Access the market directly
Connect directly* with a deep pool of verified buyers and sellers, and stay in control from start to finish.

Automate your transaction
Place a bid or list shares for sale. Standardize your fees and automate your agreements. So you can stop chasing brokers, and they can stop chasing you.

Manage your market with Hiive
With Hiive, you can pre-approve who buys, who sells, and how much. You can also create trading ranges and windows. You make the rules, and we take care of the rest.

How can Hiive work for you?
Investors & Funds

Take the friction out of secondary trading with real time quotes on the most liquid private stocks.

Access a central marketplace

Deal direct with your counterparty

Anonymity until you transact

Sellers

Selling shares has never been this easy. Match with a buyer, and agree on a deal in a few simple steps.

Instant price discovery

Fixed and competitive fees

Anonymity until you sell

Seamless transaction process

Issuers

Manage your stock’s market, without the cost and complexity of a tender offer process.

Approve all buyers and sellers

Enjoy a compliant venue for secondaries

Specify price and volume parameters

Consolidate your cap table using batched transfers and Hiive Funds

Private Shares Trading

The Private Shares Trading team facilitates transactions in privately held securities, with a focus on shares of venture-backed companies. Generally, these companies are valued at $500 million or above (series C or later).

The team represents both buyers and sellers, handling pricing negotiation between parties and issuer approval for ownership transfer.

Our team works diligently to provide secondary liquidity for longtime shareholders of venture-backed companies and to help asset managers build positions in these tightly held companies outside of the traditional fundraising environment.

Contact Us

I am a Private Shares Seller
Venture or Secondaries Fund
An employee of a private/Venture-backed company with shares to offer
Angel Investors
Submit an inquiry

I am a Private Shares Buyer
Venture or Secondaries Fund
Hedge Fund
Mutual Fund Complex
Pension Plan
E&F or Family Office
Insurance Companies
Submit an inquiry
Our Capabilities
Learn more about how the Private Shares Trading team offers a “one-stop-resource” for both buyers and sellers of private shares, drawing on the depth and breadth of our comprehensive, award-winning research platform across both public and private companies.

How to Invest in Private Companies
By Ryan Furhmann Updated January 07, 2024
Reviewed by Julius Mansa
Fact checked by Katrina Munichiello
It's much easier to invest in a publicly traded firm rather than a privately held company. Public companies, especially larger ones, can easily be bought and sold through online brokers and trading platforms. They have superior liquidity and a quote market value. It can be years before a private firm can be sold again, and prices must be negotiated between the seller and buyer.

Key Takeaways
Private companies aren't required to provide information to the public so it can be almost impossible to accurately gauge their finances.
You'll have more direct input into a private company's financial decisions if you have a significant ownership stake.
A private company's stage of development can shed insight into how risky it is as an investment.
Securities laws make it difficult for retail investors to buy shares of private companies, except in certain circumstances.
Private companies can require very long investment timeframes.
Private Companies vs. Public Companies
Public companies must file financial statements with the Securities and Exchange Commission (SEC) and this makes it easy to track their highs and lows on a quarterly and annual basis.1 Private companies aren't required to provide any information to the public so it can be extremely difficult to determine their financial soundness, historical sales, and profit trends.2

There are nonetheless a handful of advantages to be found in a company not being public. A major criticism of many public firms is that they're overly focused on quarterly results and meeting the short-term expectations of Wall Street analysts. It can cause them to miss out on long-term, value-creating opportunities, such as investing in a product that may take years to develop. This can hurt profits in the near term. Private firms can be better managed for the long term.

Being an owner of a private firm means sharing more directly in the underlying firm's profits. Earnings may grow at a public firm but they're retained unless they're paid out as dividends or used to buy back stock. Private firm earnings can be paid directly to the owners. Private owners can also have a larger role in the decision-making process at the firm, especially investors with large ownership stakes.

Types of Private Companies
A private company is defined for investment purposes by its stage in development.

Angel Investing
Entrepreneurs usually receive funding from a friend or family member on very favorable terms when they first start a business. This is referred to as angel investing. The private company is known as an angel firm.

Venture Capital Investing
Venture capital investing comes after the start-up phase when a group of more savvy investors offers growth capital, managerial know-how, and other operational assistance. A firm is seen to have at least some long-term potential at this stage.

Mezzanine Investing
Mezzanine investing can come next. This consists of equity and debt that will convert to equity if the private company can't meet its interest payment obligations.

The Private Equity Stage
Later-stage private investing is simply referred to as private equity. It's a roughly twelve-trillion-dollar business with many large players.3

A private company's stage of development can help an investor define how risky it is as an investment. Up to 70% of all angel investments lose money, but the risk drops as a private company becomes more developed and profitable.4 The goal of many private firms is to eventually go public and provide liquidity for company founders or other investors but other private businesses may prefer to stay private given the benefits.

In the United States, securities laws restrict private companies from selling equity securities to the general public. However, there are certain exemptions for employees, low-scale crowdfunding, and accredited investors.5
How to Invest in Private Companies
Early-stage private investing offers the most investment opportunities but it's also the riskiest. Joining an angel investor organization or investment group may be a good idea as a result. It can help make the process easier and potentially spread the investment risks across a wide group of firms.

Venture funds also exist and they solicit outside partners for investing capital. There are small or private business brokers that specialize in buying and selling these firms.

Private equity is also an option. Ironically, a number of the largest private equity firms are publicly traded so they can be purchased by any investor. Several mutual funds can also offer at least some exposure to private companies.

Other Considerations
Private companies aren't liquid and they require very long investing timeframes. Most investors will need an eventual liquidity event to cash out. These can include when the company goes public, when it buys out its private shareholders, or if it's bought out by a rival or another private equity firm. As with any security, private companies must be valued to determine if they're fairly valued, overvalued, or undervalued.

It's also important to note that investing directly in private firms is usually reserved for wealthy individuals. The motivation is that they can handle the additional illiquidity and risk that goes with private investing. The U.S. Securities and Exchange Commission calls these individuals accredited investors or qualified institutional buyers (QIB) when they're institutions.67

What Is the Role of the Securities and Exchange Commission (SEC?)
The SEC indicates that its mission is "to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation." It has no control over private companies unless they sell securities because it regulates securities.8

What Is Venture Capital?
Venture capital raises money for projects, ideas, and new businesses that might not be able to receive financing from other sources. This typically includes businesses that may not turn a profit for a good many years or those that are providing new or unique products or services.9

What Does It Mean When a Company Isn't Liquid?
A company isn't liquid when it doesn't have ready access to cash or assets that can be easily converted into cash. These can include bonds, accounts receivable, certain marketable securities, and money market accounts. Accounts receivable may or may not be considered liquid assets depending on how easily or regularly they can be collected.10

The Bottom Line
It's easier than ever to invest in private companies but an investor still has to do their homework. Investing directly isn't a viable option for most investors but there are still ways to gain exposure to private firms through more diversified investment vehicles. An investor definitely has to work harder and overcome more obstacles when they're investing in a private firm compared to a public one but the work can be worth it because there are several advantages.

Private Market Investing Explained
July 20, 2023 • 8 min read
Private Market Investing Explained
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Some of the most potentially alluring investment opportunities today can be found outside the public markets. Moreover, the market for such investments has been rapidly expanding, even as the public market has been contracting.

“In the year 2000, there were 8,000 publicly traded stocks, and today there’s around 3,700,” Mitch Reiner, founding partner at Altera Investments told US News and World Report. That’s nearly a 50% decline in public investment options in just over 20 years. Meanwhile, according to McKinsey’s Private Markets Annual Review, private market assets under management grew 170% within the last decade.

With those facts in mind, here’s a brief guide to private market investing.

What is Private Market Investing?
Simply put, private market investing refers to investments made in the equity or debt of companies that are not listed on a stock exchange. In other words, these are companies that have not “gone public.” This form of investing helps increase the value of a company, which gives an investor the opportunity to realize outstanding gains from a trade sale, buyout, recapitalization, or IPO.

Access to these opportunities for individual investors has traditionally been rather limited. In the past, one had to meet the criteria of an accredited investor before being allowed to take on the risk that investing in private markets entails.

However, introduction of the SEC’s Regulation A has opened the door for people who don’t fall into that category. In fact, individual investors can now take advantage of these opportunities with a platform such as Yieldstreet’s alternative investment strategies.

Characteristics of the Private Market
The McKinsey Report mentioned earlier also notes that private equity (PE) has outpaced other asset classes and, since 2008, has experienced less volatility than the market in general. Moreover, with net returns of over 14%, PE has also outpaced its public market equivalents.

Further, the US Private Equity Index boasts a 10.48% 20-year return, while the S&P 500 only managed 5.91% over those same two decades. These results have led investors to pay more attention to the private market.

With relaxed regulatory restrictions in play, many companies are opting to stay private, as they no longer really need the public exchanges to raise capital. This is amplified by the fact that since there has been an increase in liquidity in the private marketplace, companies also have a lot more room to grow.

The relaxed regulatory environment has also freed companies of certain regulatory reporting requirements, which gives them more flexibility. These factors have contributed to the increased value of private companies, which in turn is attracting even more investment dollars since the potential for the generation of substantial returns has also increased.

The Differences Between Private and Public Market Investing
The primary difference between the two marketplaces is liquidity. Investing in a privately held company still comes with more restrictions than investing in public companies. While the latter category has easy-to-trade stocks and bonds, meaning an investor can liquidate their position pretty much any time they’d like by selling to another investor. On the other hand, this liquidity also contributes to their volatility.

Still, overall, public market investments tend to entail different risks— though they are far from risk free. For this reason, private market investing may be better for people who can afford to have their money tied up for a while and will not suffer a severe financial setback if the investment fails to perform.

Public companies are subject to strict regulation and must issue periodic reports on their performance. This makes it easy to research them to determine whether an investment has a good chance of generating returns. Meanwhile, the exact opposite is true of private companies.

Why Invest in Private Markets?
Simply put, the potential for reward is greater.

Investing in private markets affords investors the opportunity to realize a premium for the lack of liquidity they agree to take on. In other words, because private markets tie up an investor’s money for longer periods of time, they can often offer a higher return. Moreover, there exists a much wider variety of investment opportunities in private markets than in public. As we noted previously, the number and ways of private market investing are increasing, even while the number of public market offerings are on the decline.

The access the private market grants to younger and smaller companies also provides the opportunity to realize larger gains than can be obtained in the public market, where companies tend to be both bigger and more mature. Alphabet, Amazon, Apple, and Meta are high-performing stocks, but their size, age and success make shares very costly to acquire. Meanwhile, the same money required to get a toehold in one of those companies will get you a much larger stake in smaller, privately held concerns.There are other significant benefits to be derived from backing a nascent enterprise and sticking with it. The average age of a company issuing an IPO is between 8 and 10 years of age, according to the California Legislative Analyst’s Office. And, while people tend to get really excited about the potential for gains when a company issues an IPO, the reality is that the highest investor returns typically go to those who backed the company early on in its development.

Another reason to invest in private markets is diversification1. Spreading capital over a wide variety of investment options that encompass a broader representation of the economy is healthier for an investment portfolio. To this end, the private market can provide size diversification. Public market investments tend to lock investors into larger companies, while private companies are usually smaller.

And again, private market investments have outperformed public assets considerably. Over the past 15 years, private equity has marked 14% annualized returns, while the S&P 500 posted 9.3%, the Russell 3000 returned 10%, and MSCI World delivered 7.2%.

What Does Investing In Private Markets Entail?
Although the SEC has relaxed rules concerning private market investing, it remains next to impossible for the average investor to enter the market on their own. Thus, the most common way for retail investors is through a managed fund. After all, the degree of due diligence one must exercise to get an idea of the viability of such an investment is substantial — far more than a public investment, in which all the data you need is published and readily available.

“Successful private placement investors will often invest millions of dollars across hundreds of companies to have a hope of finding one which becomes successful,” investment advisor Joshua Troesh told U.S. News. “They also pay for their own due diligence by hiring accountants, lawyers, financial advisors, and other professionals to pore over the company’s documents and plans before they invest.”

That’s why the financial cognoscenti advise working with a professional fund manager with a strong track record in their respective area.

The Risks of Private Market Investing
As with public investments, there are no guarantees of success. However, this is even more of a concern in the case of private market investing, because so little is published about companies in question. It can be extremely difficult for the average retail investor to do the necessary due diligence.

Exacerbating this concern is the fact that so many small companies fail.

Private equity tends to favor tech, pharmaceuticals, and biotech, all of which have sizable investment requirements — as well as the potential to generate huge returns.

However, these are also among the riskiest fields in which to invest. A lackluster management team, an unreceptive marketplace, or unanticipated competition can render an emerging enterprise impotent. On average, just two of every 12 such concerns produce significant returns for investors.

There is also the decided lack of liquidity of these investments. Small companies, especially startups, can take a while to produce returns. Most private equity investors resign themselves to a four-to-seven period during which they see no return at all. This means that finding someone to buy you out can be a difficult undertaking. Meanwhile, traditional public asset classes such as stocks, mutual funds and exchange-traded funds (ETFs) can be bought and sold quite readily.

Accessing the Private Market
Until recently, the private market was solely the domain of high net worth investors. After all, these people could more readily absorb losses when they occurred and have the connections to make deals happen before they reach the public. However, the other side of this is that mainstream investors have long been denied the opportunity to benefit from the growth potential of well-run private businesses.

Regulation A gives companies the ability to raise as much as $75 million in equity investment from the public — and remain exempt from registering the offering. This has created opportunities such as equity crowdfunding, which can increase investment options for regular people who have traditionally been limited to products such as public bonds, stocks and savings accounts.

Offerings such as the Yieldstreet Alternative Income Fund seek to generate income by investing across private asset classes such as Art, Commercial, Consumer, Legal, Real Estate, and Corporate. Its diverse2 specialty finance holdings are sourced from private market opportunities that have been historically off-limits to retail investors. However, retail investors can now access those elusive asset classes in a single investment as low as $10,000.

Private Markets vs. Public Markets: Everything You Need to Know
Edited By Darin Soat, Updated: Nov 5, 2024

Skyscrapers representing the comparison between private markets and public markets in investment strategies.
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Investing in the right securities—whether in private or public markets—can lead to significant financial gains. When private market investing aligns well with your financial goals, it can be beneficial for companies, investors, and even society at large.

Public investing is more widely known, but as the PitchBook Private Markets Guide states, “If you’re overlooking it, you’re missing a major, fast-growing sector of the economy—one that includes millions of companies, from venture-backed startups like Lyft to private equity-backed franchises like Safeway.”

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Table of Contents

Private Markets
Private Equity
Private Equity Returns
Public Markets
Public Equity
Public Investment
Private Sector vs. Public Sector
Private Markets
What are Private Markets?
Private markets refer to investments that cannot be traded on a public exchange or stock market. These markets involve alternative investments, such as private equity, private debt, venture capital, and hedge funds. Investors can either invest directly by purchasing shares in private companies or indirectly by buying shares in private equity firms.

Private Market Investing: Two Main Ways to Invest
Direct Private Market Investing: This means purchasing shares directly from a private company.
Indirect Private Market Investing: This involves purchasing shares in a private equity firm that invests in multiple private companies.
Since startup investments can be risky, the government allows only ultra-high-net-worth individuals to directly invest in private companies. While indirect private market investments typically have a lower wealth standard than public market investing, they still require a substantial investment.

Examples of Private Markets
Many private equity firms remain private, but a few are publicly traded. Here are some notable examples of private market firms:

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Goldman Sachs
CVC Capital Partners
HarbourVest Partners
EQT
Bain Capital
Francisco Partners
Alpine Investors
Warburg Pincus LLC
Neuberger Berman Group LLC
While the risks in private markets are generally higher than in public markets, the potential rewards can outweigh those risks.

Benefits of Private Market Investing
Investing in private markets offers several key benefits, including:

Higher Returns: A study by the CAIA shows that state pensions’ private equity allocations delivered an 11% return over 21 years, compared to 6.9% in public markets over the same period.
Diversification: Private markets allow access to sectors that aren’t available in public markets. Combining both private and public investments can enhance diversification and potentially yield higher returns.
Lower Volatility: Private market investments, which are typically long-term, tend to have lower volatility compared to shorter-term investments.
Challenges of Private Markets
While private market investing has its benefits, there are also some challenges to consider:

Long-term asset commitment (5 to 10 years)
Complex tax reporting (such as separate Schedule K-1 forms)
Lack of resources (requires top-quality managers and staff)
High fees (due to talent and manual processes)
Private Equity
What is Private Equity Investing?
Private equity investing involves limited partners (LPs) coming together to form investment partnerships. These partnerships purchase private companies, help manage them, and guide their growth. Once the company becomes financially stronger, the limited partners can sell it at a profit, realizing a return on their investment.

Typically, private equity investors focus on industries in which they have experience or expertise, enabling them to actively contribute to the company’s success and development.

The most common way to invest in private markets is to buy shares of stock in a private company. Although it’s less common, investors may also buy into the private equity firms that invest in privately-owned companies. A private marketing investing platform makes accessing an array of private companies effortless.

What Are Private Equity Securities?
Private equity securities are investable assets that private companies sell to raise capital. These securities allow private companies to access funds from accredited investors, which can then be used for growth or expansion.

Private equity securities can be issued at any stage of a company’s life cycle. For example, early-stage companies can use the funds as seed capital, while more mature companies may use them to scale operations or enter new markets.

Does Private Equity Outperform Public Markets?
Private equity investments have consistently outperformed public markets, even during challenging economic times. According to Fortune, three key factors contribute to this superior performance:

valuations
access to capital
active management
During the 2008 global financial crisis, private market deals generated an internal rate of return (IRR) of 61%, compared to the S&P 500’s return of -38% over the same period. This shows how private equity investments, with their hands-on management approach, can weather economic downturns better than public market investments.

Private Equity Returns
Historically, private equity has delivered strong returns over the long term, even though investors do not see a return on their money until the investment exits. The National Bureau of Economic Research (NBER) found that every dollar invested in private equity yielded a 20% higher return than every dollar invested in the S&P 500.

Additionally, private equity buyout funds have consistently outperformed public markets since the 1980s. Data shows that private equity performed better than public markets throughout the 1980s, 1990s, and 2000s, making it a high-return investment option for long-term investors.

Private Equity vs. Public Equity Returns

Private equity investments often involve companies that are poised for an IPO, which generally have high growth potential. This potential usually results in private equity returns exceeding those of public stocks, though that is not always the case.

From 2000 to 2020, private equity returns averaged 10.48% annually, according to the U.S. Private Equity Index by Cambridge Associates. In comparison, the Russell 2000 Index reported average returns of 6.69%, and the S&P 500 Index averaged 5.91% over the same period.

Private Equity Returns vs. Other Asset Classes

Private equity returns often outperform other asset classes. While comparing various asset classes can be challenging due to differences in risk profiles and market conditions, here’s how private equity stacks up against other investments:

Private Equity: 10.48% (20-year average, according to Yieldstreet)
Venture Capital: 15.15% (top performer, 2010-2020, according to Cambridge Associates)
Hedge Funds: 4.99% (2011-2020, according to the American Enterprise Institute)
These statistics highlight the superior returns of private equity compared to other asset classes, especially over the long term.

Public Markets
What Is the Public Equity Market?
Public equity markets consist of companies that have transitioned from private to public status by listing on stock exchanges through an Initial Public Offering (IPO). Public companies are owned by millions of investors, providing them with access to capital from a broad investor pool. The largest public companies, such as Microsoft, Amazon, and Apple, are listed on exchanges like the NASDAQ and the New York Stock Exchange (NYSE).

Public Market Investing
Investors in public markets can adopt different strategies. Some prefer long-term investments, buying stocks and allowing them to grow over time, while others actively trade stocks to maximize profits. Active public market investors closely monitor their investments and advocate for responsible management.

Types of Public Markets
The two main stock exchanges in the U.S. are the NASDAQ and the NYSE. There are also several other exchanges, including:

Philadelphia Stock Exchange
Boston Stock Exchange
NYSE Arca
NYSE American
International exchanges include:

Shanghai Stock Exchange
Euronext
Tokyo Stock Exchange
National Stock Exchange of India
London Stock Exchange
Benefits of Public Markets
There are several benefits to investing in public markets:

Requires only a small initial investment.
Provides liquidity, enabling fast access to cash.
Enhances portfolio diversification.
Promotes compounding, where funds are reinvested for continuous growth.
Despite these benefits, public market investors also face certain risks.

Challenges of Public Markets
Here are six challenges that public market investors should consider:

Business risk: companies may not perform well, leading to losses
Negative media headlines can harm a company’s performance
Difficulty in selling small or penny stocks at fair prices
Broker fees can reduce profit margins
Reliance on brokers for knowledge and market trends
Trading can be time-consuming, although online platforms have made this process easier
Private Equity Volatility vs. Public Equity Volatility
Private equity typically offers the advantage of lower volatility compared to public equity, while also providing the potential for higher returns. These characteristics result in higher risk-adjusted returns, which is the ratio between the potential return and the degree of risk taken on the investment.

Data from Enterprising Investor provides a comparison of volatility between private equity, the S&P 500, and U.S. 10-year bonds:

Private Equity Volatility: 7%
S&P 500 Volatility: 13.1%
U.S. 10-Year Bond Volatility: 7.7%
As you can see, private equity volatility is roughly half that of the S&P 500 and slightly lower than the volatility of U.S. 10-year bonds. This lower volatility makes private equity investments more stable over time compared to public equities, which can experience sharper price swings due to market fluctuations.

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Public Investment
What Is a Public Investment?
Public investment refers to the funds that governments allocate to build infrastructure and provide essential goods and services for their communities. This can be done through public or private organizations, or nonprofits, with the goal of meeting community needs and improving the quality of life for residents.

Over time, governments have developed various public-private partnerships to ensure more efficient use of resources and to save costs.

Types of Public Investment
Governments invest in many sectors that are essential to both local and national economies. These areas include:

Transportation: Roads, highways, bridges, and public transit systems
Telecommunications: Expanding internet and mobile network access
Energy: Building power plants, wind farms, and other energy infrastructure
Buildings: Schools, hospitals, libraries, and government buildings
Education: Investing in public schools, universities, and other educational facilities
Goods and Services: Public consumption, such as utilities or public safety services
IT Systems: Developing modern technology for governance and public services
Green Energy: Investments in renewable energy projects and environmental sustainability
Each of these sectors plays a crucial role in fostering economic growth on local, national, and global levels.

What Is the Role of Public Investment in Economic Growth?
Public investment is central to promoting productivity, improving social well-being, and helping communities thrive. Many people choose where to live and work based on the quality of life, which is often influenced by public infrastructure and services.

Additionally, governments frequently invest in pension plans as retirement benefits for public servants. These investments contribute to economic stability and long-term financial security for the population.

Public Investment Data
Thirty-eight countries have joined the Organization for Economic Co-Operation and Development (OECD) to promote world trade and economic progress. Here’s a snapshot of recent public investment data:

In 2019, government investment spending across OECD countries averaged 3.3% of GDP
Public investment makes up 15% of total public and private investments in OECD member nations
60% of public investment is directed towards education and transportation/economic affairs
Regional and local governments account for 57% of total public investment as of 2016
Public and private markets both play essential roles in supporting economies and helping communities achieve growth.

Private vs. Public Markets: Key Differences
Here are five major differences between private and public markets:

Accessibility: Anyone can invest in public markets, but private markets are open only to high-net-worth individuals
Liquidity: Public investors can buy and sell shares at any time, while private investors often commit for the long term
Management Style: Public investors can take a passive approach, while private investors typically mentor the companies they invest in
Transparency: Public markets are subject to strict transparency regulations, whereas private markets have fewer regulatory requirements
Stage of Investment: Public markets deal with established companies, while private investors often focus on companies in early growth stages
This material, provided by Linqto, is for informational purposes only and is not intended as investment advice or any form of professional guidance. Before making any investment decision, especially in the dynamic field of private markets, it is recommended that you seek advice from professional advisors. The information contained herein does not imply endorsement of any third parties or investment opportunities mentioned. Our market views and investment insights are subject to change and may not always reflect the most current developments. No assumption should be made regarding the profitability of any securities, sectors, or markets discussed. Past performance is not indicative of future results, and investing in private markets involves unique risks, including the potential for loss. Historical and hypothetical performance figures are provided to illustrate possible market behaviors and should not be relied upon as predictions of future performance.

Introduction to Private Equities
Private equities are investments in companies not trading within the public equities markets. Unlike public companies, whose shares are available to be bought by anyone, private equity trade is usually accessible only to institutional investors, accredited investors, or via private equity firms. The investments involve venture capital, growth capital, buyouts, and more. Private equity trade is all about active management, operational enhancement, and long-term growth against high returns—often realized through the ultimate sale or IPO of invested companies. Now that we know what is trading on equity and what is private equity, let's look at the differences between private and public equity.

Key Differences Between Private and Public Equities

Accessibility:

Private Equities: Generally available only to institutional investors and high-net-worth individuals.
Public Equities: Offered to all classes of investors over the stock exchange.
Regulation:

Private Equities: lightly regulated; very few disclosure norms to adhere to.
Public Equities: Highly regulated, stringent reporting, and high disclosure norms.
Liquidity:

Private Equities: Not liquid; it involves a longer time before the returns are realized.
Public Equities: Highly liquid—can be quickly bought and sold.
Valuation:

Private Equities: Price determination through negotiation and, in most cases, by an infrequent, complicated procedure of valuation.
Public Equities: The price is set by the listed in both the stock exchanges.
Why Invest in Private Equities?
High Return Potential: Private equities may generate higher returns than Public ones by dint of the potential value creation emanating from active management and operational improvements.

Diversification: Private equities provide an avenue for the diversification of an investor's portfolio in order to reduce the overall risk by investing in various sectors and companies that do not correlate with public markets.

Control and Influence: The private equity investor has more control and propensity to influence all strategic decisions about the company's strategic direction and operational changes, all of which impact the growth and profitability of the company.

Access to Unique Opportunities: Many private equity investments involve unique opportunities, such as venture capital early-stage investments in the most promising modern startups, or buying out established companies from the private sector.

Long-term orientation: Generally, private equity investments are long-term, aligning the interests of investors and management toward the creation of value and growing sustainably over time.

How Private Equity Trading Works
Trading private equities involves the selling and buying of ownership stakes in private companies. While public equities take place on public stock exchanges, private equity trading represent dealings that occur outside public stock exchange markets through privately negotiated deals between willing buyers and sellers or those facilitated by private equity firms.

The typical trading process includes intensive due diligence and valuation assessments in an effort to have a transaction as fair and secure as possible, with a substantial amount of legal documentation. Private equity firms are known to be in a critical position when sourcing opportunities, structuring investments, and subsequently handling portfolio companies.

Steps on How toTrade Private Equities

Deal Sourcing:Looking for potential or investment opportunity networking and through industries via contacts and private equity firms.
Due Diligence:Careful consideration of the Target Company's Financials, Operations and Market Potential.
Valuation: Estimating Fair Value of the Target Company through Financial Modeling and Negotiation.
Structuring the Deal: Writing terms of the investment, including equity stakes, control rights, and exit strategies.
Legal Documentation: Preparation of agreements and their signing to legalize the investment.
Post-Investment Management:Active management of the investment to enhance value and prepare for eventual exit through a sale or IPO.
Platforms for Trading Private Equities
Private equities trade on various kinds of platforms, which include:

Private Equity Firms:firms that pool funds from investors to acquire stakes in private companies, hence giving an investor access to a diversified portfolio of private equity trades.
Secondary Market Platforms:Online platforms facilitate the trading of pre-IPO shares, allowing investors to buy and sell private company shares before they go public.
Direct Investments: Institutional investors and high-net-worth individuals can participate directly in investment in private companies through personal networks and investment clubs.
Regulatory Aspects of Private Equity Trading
Private equity trading is regulated under specific jurisdiction-regulated regulatory frameworks. The important aspects of regulation related to the same are as follows:

Accredited Investor Requirements: Generally, an accredited investor—a category of persons meeting specified income or net worth requirements—can participate in private equities.

Disclosure Requirements: Despite being less stringent than for public equities, private equity trades are still subject to some disclosure standards that help protect investors from unsavory deals.

Securities Laws: The law on local securities, coupled with their ancillary requirements for registration and reporting, should be fully complied with.

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Risks and Rewards of Trading Private Equities
Rewards:

• High Returns: Likelihood of high returns due to high value creation.

• Control: More control over the management of the company and the strategies to be implemented.

• Diversification: The ability to participate in unique investments that are not correlated with the public markets.

Risks :

• Illiquidity: It's tough to sell investments quickly without facing a substantial loss in value.

• High Minimum Investment: Apart from being expensive, it often requires substantial capital, hence shutting out the small investor.

Long Holding Periods: Years are needed to make investments pay off, requiring patience and long-term approaches.
Operational Risk: Possible operational challenges and problems in management that a portfolio company may face.
Brokers and Intermediaries Role in Trading of Private Equity
Brokers and intermediaries play a significant role in private equity trading by:

Deal Sourcing: Identifying and presenting an investment opportunity to potential investors.

Facilitating Transactions: Assistance in negotiations, transaction structuring, and compliance with applicable laws.

Rendering Expertise: Industry, financial, and strategic insights to help frame investment decisions.

Due Diligence: Thorough review and analysis of target companies to identify pitfalls and enable prudent investments.

Getting Started with Private Equity Trading

Learn the Market: Educate yourself on private equity markets, strategies, and risks.
Accredited investor: Make sure you are qualified for investment in private equities.
Choose the Right Platform: Choose the appropriate private equity firm, secondary market platform, or direct investment approach that will serve your goals for your investments.
Due Diligence: Carefully assess prospective investments against parameters such as financials, management team, potential marketability, etc.
Invest and Track: Finally, make the investment and track its performance keenly. Provide the needed support system and strategic advice.
Conclusion
Trading private equities holds vast opportunities for high yields, diversification, and control over investments. On the other hand, this asset class also involves matters of risk associated particularly with the liquidity of assets, high minimum investments, and regulatory requirements. Knowing the major points in trading private equities, performing due diligence, and seeking help via brokers and intermediaries, investors can tread this difficult market and gain a lot financially.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

Private equity (PE) is stock in a private company that does not offer stock to the general public. In the field of finance, private equity is offered instead to specialized investment funds and limited partnerships that take an active role in the management and structuring of the companies. In casual usage, "private equity" can refer to these investment firms, rather than the companies in which that they invest.[1]

Private-equity capital is invested into a target company either by an investment management company (private equity firm), a venture capital fund, or an angel investor; each category of investor has specific financial goals, management preferences, and investment strategies for profiting from their investments. Private equity provides working capital to the target company to finance the expansion of the company with the development of new products and services, restructuring of operations, management, and formal control and ownership of the company.[2]

As a financial product, the private-equity fund is a type of private capital for financing a long-term investment strategy in an illiquid business enterprise.[3] Private equity fund investing has been described by the financial press as the superficial rebranding of investment management companies who specialized in the leveraged buyout of financially weak companies.[4]

Evaluations of the returns of private equity are mixed: some find that it outperforms public equity, but others find otherwise.[5]

Key features
Some key features of private equity investment include:

An investment manager (the private equity investor) raises money from institutional investors (e.g., hedge funds, pension funds, university endowments, and ultra-high-net-worth individuals) to pursue a particular investment strategy.
The fundraise proceeds are placed into an investment fund, in which the investment manager acts as a general partner (GP) and the institutional investors act as limited partners (LPs).[6]
The investment manager then purchases equity ownership stakes in companies by using a combination of equity and debt financing, with the goal of generating returns on the equity invested, including any subsequent equity investments into the target companies, over a target horizon based on the particular investment fund and strategy (typically 4–7 years).[7]
From a financial modeling perspective, the primary levers available to private equity investors to drive returns are:
Revenue growth
Margin expansion (typically an EBITDA margin)
Free cash flow generation / debt paydown
Valuation multiple expansion (typically an Enterprise Value / EBITDA multiple)
Value creation strategies can vary widely by private equity fund. For example, some investors may target increasing sales in new or existing markets (driving revenue growth), and others may look to reduce costs through headcount reduction (expanding margins). Many strategies incorporate some amount of corporate governance restructuring, for example, setting up a Board of Directors or updating the target's managerial reporting structure.[8]
The use of debt financing in acquiring companies increases an investment's return on equity by reducing the amount of initial equity required to purchase the target. Moreover, the interest payments are tax-deductible, so the debt financing reduces corporate taxes and thus increases total after-tax cash flows generated by the business.
Following a series of high-profile bankruptcies,[9] aggressive leverage usage by private equity funds has declined in recent decades. In 2005, approximately 70% of the average private equity acquisition represented debt, but it was closer to 50% in 2020.[10]
Firms that assume large operational risks (e.g., "turnarounds") will usually apply far lower leverage levels to acquired companies in order to provide management with more financial flexibility; firms taking fewer operational risks will often try to maximize available leverage and focus on investments that generate strong, stable cash flows needed to service the higher debt balances.[11]
Over time, "private equity" has come to refer to many different investment strategies, including leveraged buyout, distressed securities, venture capital, growth capital, and mezzanine capital. One of the most noteworthy differences between leveraged buyouts and the other strategies is that buyouts are generally "control equity positions", as buyout funds usually purchase majority ownership stakes in their target companies, while other investment strategies typically purchase minority ("non-control") ownership stakes, reducing their ability to effect transformational changes across target companies.
For large deals, private-equity investors often invest together in a syndicate, in order to jointly benefit from exposure diversification, complementary investor information and skills, and heightened connectivity for future investments.[12]
Strategies
The strategies private-equity firms may use are as follows, leveraged buyout being the most common.

Leveraged buyout
Main article: Leveraged buyout

Diagram of the basic structure of a generic leveraged buyout transaction
Leveraged buyout (LBO) refers to a strategy of making equity investments as part of a transaction in which a company, business unit, or business asset is acquired from the current shareholders typically with the use of financial leverage.[13] The companies involved in these transactions are typically mature and generate operating cash flows.[14]

Private-equity firms view target companies as either Platform companies, which have sufficient scale and a successful business model to act as a stand-alone entity, or as add-on / tuck-in / bolt-on acquisitions, which would include companies with insufficient scale or other deficits.[15][16]

Leveraged buyouts involve a financial sponsor agreeing to an acquisition without itself committing all the capital required for the acquisition. To do this, the financial sponsor will raise acquisition debt, which looks to the cash flows of the acquisition target to make interest and principal payments.[17] Acquisition debt in an LBO is often non-recourse to the financial sponsor and has no claim on other investments managed by the financial sponsor. Therefore, an LBO transaction's financial structure is particularly attractive to a fund's limited partners, allowing them the benefits of leverage, but limiting the degree of recourse of that leverage. This kind of financing structure leverage benefits an LBO's financial sponsor in two ways: (1) the investor only needs to provide a fraction of the capital for the acquisition, and (2) the returns to the investor will be enhanced, as long as the return on assets exceeds the cost of the debt.[18]

As a percentage of the purchase price for a leverage buyout target, the amount of debt used to finance a transaction varies according to the financial condition and history of the acquisition target, market conditions, the willingness of lenders to extend credit (both to the LBO's financial sponsors and the company to be acquired) as well as the interest costs and the ability of the company to cover those costs. Historically the debt portion of a LBO will range from 60 to 90% of the purchase price.[19] Between 2000 and 2005, debt averaged between 59.4% and 67.9% of total purchase price for LBOs in the United States.[20]

Simple example of leveraged buyout
A private-equity fund, ABC Capital II, borrows $9bn from a bank (or other lender). To this, it adds $2bn of equity – money from its own partners and from limited partners. With this $11bn, it buys all the shares of an underperforming company, XYZ Industrial (after due diligence, i.e. checking the books). It replaces the senior management in XYZ Industrial, with others who set out to streamline it. The workforce is reduced, some assets are sold off, etc. The objective is to increase the valuation of the company for an early sale.

The stock market is experiencing a bull market, and XYZ Industrial is sold two years after the buy-out for $13bn, yielding a profit of $2bn. The original loan can now be paid off with interest of, say, $0.5bn. The remaining profit of $1.5bn is shared among the partners. Taxation of such gains is at the capital gains tax rates, which in the United States are lower than ordinary income tax rates.

Note that part of that profit results from turning the company around, and part results from the general increase in share prices in a buoyant stock market, the latter often being the greater component.[21]

Notes:

The lenders (the people who put up the $9bn in the example) can insure against default by syndicating the loan to spread the risk, or by buying credit default swaps (CDSs) or selling collateralised debt obligations (CDOs) from/to other institutions.
Often the loan/equity ($11bn in the example) is not paid off after the sale, but left on the books of the company (XYZ Industrial) for it to pay off over time. This can be advantageous since the interest is largely off-settable against the profits of the company, thus reducing, or even eliminating, tax.
Most buyout deals are much smaller; the global average purchase in 2013 was $89m, for example.[22]
The target company (XYZ Industrials here) does not have to be floated on the stock market; most buyout exits after 2000 are not IPOs.[23]
Buy-out operations can go wrong and in such cases, the loss is increased by leverage, just as the profit is if all goes well.
Growth capital
Main article: Growth capital
Growth capital refers to equity investments, most often minority investments, in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a major acquisition without a change of control of the business.[24]

Companies that seek growth capital will often do so in order to finance a transformational event in their life cycle. These companies are likely to be more mature than venture capital-funded companies, able to generate revenue and operating profits, but unable to generate sufficient cash to fund major expansions, acquisitions or other investments. Because of this lack of scale, these companies generally can find few alternative conduits to secure capital for growth, so access to growth equity can be critical to pursue necessary facility expansion, sales and marketing initiatives, equipment purchases, and new product development.[25]

The primary owner of the company may not be willing to take the financial risk alone. By selling part of the company to private equity, the owner can take out some value and share the risk of growth with partners.[26] Capital can also be used to effect a restructuring of a company's balance sheet, particularly to reduce the amount of leverage (or debt) the company has on its balance sheet.[27]

A private investment in public equity (PIPE), refer to a form of growth capital investment made into a publicly traded company. PIPE investments are typically made in the form of a convertible or preferred security that is unregistered for a certain period of time.[28][29]

The Registered Direct (RD) is another common financing vehicle used for growth capital. A registered direct is similar to a PIPE, but is instead sold as a registered security.

Mezzanine capital
Main article: Mezzanine capital
Mezzanine capital refers to subordinated debt or preferred equity securities that often represent the most junior portion of a company's capital structure that is senior to the company's common equity. This form of financing is often used by private-equity investors to reduce the amount of equity capital required to finance a leveraged buyout or major expansion. Mezzanine capital, which is often used by smaller companies that are unable to access the high yield market, allows such companies to borrow additional capital beyond the levels that traditional lenders are willing to provide through bank loans.[30] In compensation for the increased risk, mezzanine debt holders require a higher return for their investment than secured or other more senior lenders.[31][32] Mezzanine securities are often structured with a current income coupon.

Venture capital
Main article: Venture capital
Venture capital[33] (VC) is a broad subcategory of private equity that refers to equity investments made, typically in less mature companies, for the launch of a seed or startup company, early-stage development, or expansion of a business. Venture investment is most often found in the application of new technology, new marketing concepts and new products that do not have a proven track record or stable revenue streams.[34][35]

Venture capital is often sub-divided by the stage of development of the company ranging from early-stage capital used for the launch of startup companies to late stage and growth capital that is often used to fund expansion of existing business that are generating revenue but may not yet be profitable or generating cash flow to fund future growth.[36]

Entrepreneurs often develop products and ideas that require substantial capital during the formative stages of their companies' life cycles.[37] Many entrepreneurs do not have sufficient funds to finance projects themselves, and they must, therefore, seek outside financing.[38] The venture capitalist's need to deliver high returns to compensate for the risk of these investments makes venture funding an expensive capital source for companies. Being able to secure financing is critical to any business, whether it is a startup seeking venture capital or a mid-sized firm that needs more cash to grow.[39] Venture capital is most suitable for businesses with large up-front capital requirements which cannot be financed by cheaper alternatives such as debt. Although venture capital is often most closely associated with fast-growing technology, healthcare and biotechnology fields, venture funding has been used for other more traditional businesses.[34][40]

Investors generally commit to venture capital funds as part of a wider diversified private-equity portfolio, but also to pursue the larger returns the strategy has the potential to offer. However, venture capital funds have produced lower returns for investors over recent years compared to other private-equity fund types, particularly buyout.

Distressed securities
Main article: Distressed securities
Further information: Valuation (finance) § Valuation of a suffering company
The category of distressed securities comprises financial strategies for the profitable investment of working capital into the corporate equity and the securities of financially weak companies.[41][42][43] The investment of private-equity capital into distressed securities is realised with two financial strategies:

"Distressed-to-Control" ("Loan-to-Own") investment whereby the investor buys debt securities in hope of acquiring ownership and control of the company's equity after financing the corporate restructuring of the target company;[44]
"Special Situations" ("Turnaround") investment wherein the investor buys debt securities and equity investments, to be used as rescue financing that will restore the profitability of the financially-weak target company.[45]
Moreover, the private-equity investment strategies of hedge funds also include actively trading the loans held and the bonds issued by the financially-weak target companies.[46]

Secondaries
Main article: Private-equity secondary market
Secondary investments refer to investments made in existing private-equity assets. These transactions can involve the sale of private equity fund interests or portfolios of direct investments in privately held companies through the purchase of these investments from existing institutional investors.[47] By its nature, the private-equity asset class is illiquid, intended to be a long-term investment for buy and hold investors. Secondary investments allow institutional investors, particularly those new to the asset class, to invest in private equity from older vintages than would otherwise be available to them. Secondaries also typically experience a different cash flow profile, diminishing the j-curve effect of investing in new private-equity funds.[48][49] Often investments in secondaries are made through third-party fund vehicle, structured similar to a fund of funds although many large institutional investors have purchased private-equity fund interests through secondary transactions.[50] Sellers of private-equity fund investments sell not only the investments in the fund but also their remaining unfunded commitments to the funds.

Other strategies
Other strategies that can be considered private equity or a close adjacent market include:

Real estate: in the context of private equity this will typically refer to the riskier end of the investment spectrum including "value-added" and opportunity funds where the investments often more closely resemble leveraged buyouts than traditional real estate investments. Certain investors in private equity consider real estate to be a separate asset class.
Infrastructure: investments in various public works (e.g., bridges, tunnels, toll roads, airports, public transportation, and other public works) that are made as part of a privatization initiative on the part of a government entity.[51][52][53]
Energy and Power: investments in a wide variety of companies (rather than assets) engaged in the production and sale of energy, including fuel extraction, manufacturing, refining and distribution (Energy) or companies engaged in the production or transmission of electrical power (Power).
Merchant banking: negotiated private-equity investment by financial institutions in the unregistered securities of either privately or publicly held companies.[54]
Fund of funds: investments made in a fund whose primary activity is investing in other private-equity funds. The fund of funds model is used by investors looking for:
Diversification but have insufficient capital to diversify their portfolio by themselves
Access to top-performing funds that are otherwise oversubscribed
Experience in a particular fund type or strategy before investing directly in funds in that niche
Exposure to difficult-to-reach and/or emerging markets
Superior fund selection by high-talent fund of fund managers/teams
Search fund: A search fund is an investment vehicle through which an entrepreneur (called a "searcher") raises funds from investors in order to acquire an existing small business.[55] After an acquisition is made, the entrepreneur takes an operating role in the acquired company, such as CEO and President.[56]
Royalty fund: an investment that purchases a consistent revenue stream deriving from the payment of royalties. One growing subset of this category is the healthcare royalty fund, in which a private-equity fund manager purchases a royalty stream paid by a pharmaceutical company to a drug patent holder. The drug patent holder can be another company, an individual inventor, or some sort of institution, such as a research university.[57]
As well as this to compensate for private equities not being traded on the public market, a private-equity secondary market has formed, where private-equity investors purchase securities and assets from other private equity investors.

History and development
History of private equity
and venture capital

Early history
(origins of modern private equity)
The 1980s
(leveraged buyout boom)
The 1990s
(leveraged buyout and the venture capital bubble)
The 2000s
(dot-com bubble to the credit crunch)
The 2010s
(expansion)
The 2020s
(COVID-19 recession)
vte
Main article: History of private equity and venture capital
Early history and the development of venture capital
Main articles: History of private equity and venture capital and Early history of private equity
The seeds of the US private-equity industry were planted in 1946 with the founding of two venture capital firms: American Research and Development Corporation (ARDC) and J.H. Whitney & Company.[58] Before World War II, venture capital investments (originally known as "development capital") were primarily the domain of wealthy individuals and families. In 1901 J.P. Morgan arguably managed the first leveraged buyout of the Carnegie Steel Company using private equity.[59] Modern era private equity, however, is credited to Georges Doriot, the "father of venture capitalism" with the founding of ARDC[60] and founder of INSEAD, with capital raised from institutional investors, to encourage private sector investments in businesses run by soldiers who were returning from World War II. ARDC is credited with the first major venture capital success story when its 1957 investment of $70,000 in Digital Equipment Corporation (DEC) would be valued at over $355 million after the company's initial public offering in 1968 (a return of over 5,000 times its investment and an annualized rate of return of 101%).[61][62][failed verification] It is commonly noted that the first venture-backed startup is Fairchild Semiconductor, which produced the first commercially practicable integrated circuit, funded in 1959 by what would later become Venrock Associates.[63]

Origins of the leveraged buyout
Main articles: History of private equity and venture capital and Early history of private equity
The first leveraged buyout may have been the purchase by McLean Industries, Inc. of Pan-Atlantic Steamship Company in January 1955 and Waterman Steamship Corporation in May 1955[64] Under the terms of that transaction, McLean borrowed $42 million and raised an additional $7 million through an issue of preferred stock. When the deal closed, $20 million of Waterman cash and assets were used to retire $20 million of the loan debt.[65] Lewis Cullman's acquisition of Orkin Exterminating Company in 1964 is often cited as the first leveraged buyout.[66][67] Similar to the approach employed in the McLean transaction, the use of publicly traded holding companies as investment vehicles to acquire portfolios of investments in corporate assets was a relatively new trend in the 1960s popularized by the likes of Warren Buffett (Berkshire Hathaway) and Victor Posner (DWG Corporation) and later adopted by Nelson Peltz (Triarc), Saul Steinberg (Reliance Insurance) and Gerry Schwartz (Onex Corporation). These investment vehicles would utilize a number of the same tactics and target the same type of companies as more traditional leveraged buyouts and in many ways could be considered a forerunner of the later private-equity firms. Posner is often credited with coining the term "leveraged buyout" or "LBO".[68]

The leveraged buyout boom of the 1980s was conceived by a number of corporate financiers, most notably Jerome Kohlberg Jr. and later his protégé Henry Kravis. Working for Bear Stearns at the time, Kohlberg and Kravis along with Kravis' cousin George Roberts began a series of what they described as "bootstrap" investments. Many of these companies lacked a viable or attractive exit for their founders as they were too small to be taken public and the founders were reluctant to sell out to competitors and so a sale to a financial buyer could prove attractive.[69] In the following years the three Bear Stearns bankers would complete a series of buyouts including Stern Metals (1965), Incom (a division of Rockwood International, 1971), Cobblers Industries (1971), and Boren Clay (1973) as well as Thompson Wire, Eagle Motors and Barrows through their investment in Stern Metals.[70] By 1976, tensions had built up between Bear Stearns and Kohlberg, Kravis and Roberts leading to their departure and the formation of Kohlberg Kravis Roberts in that year.

Private equity in the 1980s
Main articles: History of private equity and venture capital and Private equity in the 1980s
In January 1982, former United States Secretary of the Treasury William E. Simon and a group of investors acquired Gibson Greetings, a producer of greeting cards, for $80 million, of which only $1 million was rumored to have been contributed by the investors. By mid-1983, just sixteen months after the original deal, Gibson completed a $290 million IPO and Simon made approximately $66 million.[71][72]

The success of the Gibson Greetings investment attracted the attention of the wider media to the nascent boom in leveraged buyouts. Between 1979 and 1989, it was estimated that there were over 2,000 leveraged buyouts valued in excess of $250 million.[73]

During the 1980s, constituencies within acquired companies and the media ascribed the "corporate raid" label to many private-equity investments, particularly those that featured a hostile takeover of the company, perceived asset stripping, major layoffs or other significant corporate restructuring activities. Among the most notable investors to be labeled corporate raiders in the 1980s included Carl Icahn, Victor Posner, Nelson Peltz, Robert M. Bass, T. Boone Pickens, Harold Clark Simmons, Kirk Kerkorian, Sir James Goldsmith, Saul Steinberg and Asher Edelman. Carl Icahn developed a reputation as a ruthless corporate raider after his hostile takeover of TWA in 1985.[74][75][76] Many of the corporate raiders were onetime clients of Michael Milken, whose investment banking firm, Drexel Burnham Lambert helped raise blind pools of capital with which corporate raiders could make a legitimate attempt to take over a company and provided high-yield debt ("junk bonds") financing of the buyouts.

One of the final major buyouts of the 1980s proved to be its most ambitious and marked both a high-water mark and a sign of the beginning of the end of the boom. In 1989, KKR (Kohlberg Kravis Roberts) closed in on a $31.1 billion takeover of RJR Nabisco. It was, at that time and for over 17 years, the largest leveraged buyout in history. The event was chronicled in the book (and later the movie), Barbarians at the Gate: The Fall of RJR Nabisco. KKR would eventually prevail in acquiring RJR Nabisco at $109 per share, marking a dramatic increase from the original announcement that Shearson Lehman Hutton would take RJR Nabisco private at $75 per share. A fierce series of negotiations and horse-trading ensued which pitted KKR against Shearson and later Forstmann Little & Co. Many of the major banking players of the day, including Morgan Stanley, Goldman Sachs, Salomon Brothers, and Merrill Lynch were actively involved in advising and financing the parties. After Shearson's original bid, KKR quickly introduced a tender offer to obtain RJR Nabisco for $90 per share—a price that enabled it to proceed without the approval of RJR Nabisco's management. RJR's management team, working with Shearson and Salomon Brothers, submitted a bid of $112, a figure they felt certain would enable them to outflank any response by Kravis's team. KKR's final bid of $109, while a lower dollar figure, was ultimately accepted by the board of directors of RJR Nabisco.[77] At $31.1 billion of transaction value, RJR Nabisco was by far the largest leveraged buyouts in history. In 2006 and 2007, a number of leveraged buyout transactions were completed that for the first time surpassed the RJR Nabisco leveraged buyout in terms of nominal purchase price. However, adjusted for inflation, none of the leveraged buyouts of the 2006–2007 period would surpass RJR Nabisco. By the end of the 1980s the excesses of the buyout market were beginning to show, with the bankruptcy of several large buyouts including Robert Campeau's 1988 buyout of Federated Department Stores, the 1986 buyout of the Revco drug stores, Walter Industries, FEB Trucking and Eaton Leonard. Additionally, the RJR Nabisco deal was showing signs of strain, leading to a recapitalization in 1990 that involved the contribution of $1.7 billion of new equity from KKR.[78] In the end, KKR lost $700 million on RJR.[79]

Drexel reached an agreement with the government in which it pleaded nolo contendere (no contest) to six felonies – three counts of stock parking and three counts of stock manipulation.[80] It also agreed to pay a fine of $650 million – at the time, the largest fine ever levied under securities laws. Milken left the firm after his own indictment in March 1989.[81][82] On 13 February 1990 after being advised by United States Secretary of the Treasury Nicholas F. Brady, the U.S. Securities and Exchange Commission (SEC), the New York Stock Exchange and the Federal Reserve, Drexel Burnham Lambert officially filed for Chapter 11 bankruptcy protection.[81]

Age of the mega-buyout: 2005–2007
Main articles: History of private equity and venture capital and Private equity in the 21st century
The combination of decreasing interest rates, loosening lending standards and regulatory changes for publicly traded companies (specifically the Sarbanes–Oxley Act) would set the stage for the largest boom private equity had seen. Marked by the buyout of Dex Media in 2002, large multibillion-dollar U.S. buyouts could once again obtain significant high yield debt financing and larger transactions could be completed. By 2004 and 2005, major buyouts were once again becoming common, including the acquisitions of Toys "R" Us,[83] The Hertz Corporation,[84][85] Metro-Goldwyn-Mayer[86] and SunGard[87] in 2005.

As 2006 began, new "largest buyout" records were set and surpassed several times with nine of the top ten buyouts at the end of 2007 having been announced in an 18-month window from the beginning of 2006 through the middle of 2007. In 2006, private-equity firms bought 654 U.S. companies for $375 billion, representing 18 times the level of transactions closed in 2003.[88] Additionally, U.S.-based private-equity firms raised $215.4 billion in investor commitments to 322 funds, surpassing the previous record set in 2000 by 22% and 33% higher than the 2005 fundraising total[89] The following year, despite the onset of turmoil in the credit markets in the summer, saw yet another record year of fundraising with $302 billion of investor commitments to 415 funds[90] Among the mega-buyouts completed during the 2006 to 2007 boom were: EQ Office, HCA,[91] Alliance Boots[92] and TXU.[93]

In July 2007, the turmoil that had been affecting the mortgage markets, spilled over into the leveraged finance and high-yield debt markets.[94][95] The markets had been highly robust during the first six months of 2007, with highly issuer friendly developments including PIK and PIK Toggle (interest is "Payable In Kind") and covenant light debt widely available to finance large leveraged buyouts. July and August saw a notable slowdown in issuance levels in the high yield and leveraged loan markets with few issuers accessing the market. Uncertain market conditions led to a significant widening of yield spreads, which coupled with the typical summer slowdown led many companies and investment banks to put their plans to issue debt on hold until the autumn. However, the expected rebound in the market after 1 May 2007 did not materialize, and the lack of market confidence prevented deals from pricing. By the end of September, the full extent of the credit situation became obvious as major lenders including Citigroup and UBS AG announced major writedowns due to credit losses. The leveraged finance markets came to a near standstill during a week in 2007.[96] As 2008 began, lending standards tightened and the era of "mega-buyouts" came to an end. Nevertheless, private equity continues to be a large and active asset class and the private-equity firms, with hundreds of billions of dollars of committed capital from investors are looking to deploy capital in new and different transactions.[citation needed]

As a result of the global financial crisis, private equity has become subject to increased regulation in Europe and is now subject, among other things, to rules preventing asset stripping of portfolio companies and requiring the notification and disclosure of information in connection with buy-out activity.[97][98]

Staying private for longer
From 2010 to 2014 KKR, Carlyle, Apollo and Ares went public. Starting from 2018 these companies converted from partnerships into corporations with more shareholder rights and the inclusion in stock indices and mutual fund portfolios.[99] But with the increased availability and scope of funding provided by private markets, many companies are staying private simply because they can. McKinsey & Company reports in its Global Private Markets Review 2018 that global private market fundraising increased by $28.2 billion from 2017, for a total of $748 billion in 2018.[100] Thus, given the abundance of private capital available, companies no longer require public markets for sufficient funding. Benefits may include avoiding the cost of an IPO, maintaining more control of the company, and having the 'legroom' to think long-term rather than focus on short-term or quarterly figures.[101][102]

A new phenomenon in the Twenties are regulated platforms which fractionalise the assets making investment sizes of $10,000 or less possible.[103]

Investments in private equity

Diagram of the structure of a generic private-equity fund
Although the capital for private equity originally came from individual investors or corporations, in the 1970s, private equity became an asset class in which various institutional investors allocated capital in the hopes of achieving risk-adjusted returns that exceed those possible in the public equity markets. In the 1980s, insurers were major private-equity investors. Later, public pension funds and university and other endowments became more significant sources of capital.[104] For most institutional investors, private-equity investments are made as part of a broad asset allocation that includes traditional assets (e.g., public equity and bonds) and other alternative assets (e.g., hedge funds, real estate, commodities).

Investor categories
US, Canadian and European public and private pension schemes have invested in the asset class since the early 1980s to diversify away from their core holdings (public equity and fixed income).[105] Today pension investment in private equity accounts for more than a third of all monies allocated to the asset class, ahead of other institutional investors such as insurance companies, endowments, and sovereign wealth funds.

Direct versus indirect investment
Most institutional investors do not invest directly in privately held companies, lacking the expertise and resources necessary to structure and monitor the investment. Instead, institutional investors will invest indirectly through a private equity fund. Certain institutional investors have the scale necessary to develop a diversified portfolio of private-equity funds themselves, while others will invest through a fund of funds to allow a portfolio more diversified than one a single investor could construct.

Investment timescales
Returns on private-equity investments are created through one or a combination of three factors that include: debt repayment or cash accumulation through cash flows from operations, operational improvements that increase earnings over the life of the investment and multiple expansion, selling the business for a higher price than was originally paid. A key component of private equity as an asset class for institutional investors is that investments are typically realized after some period of time, which will vary depending on the investment strategy. Private-equity investment returns are typically realized through one of the following avenues:

an initial public offering (IPO) – shares of the company are offered to the public, typically providing a partial immediate realization to the financial sponsor as well as a public market into which it can later sell additional shares;
a merger or acquisition – the company is sold for either cash or shares in another company;
a recapitalization – cash is distributed to the shareholders (in this case the financial sponsor) and its private-equity funds either from cash flow generated by the company or through raising debt or other securities to fund the distribution.
Large institutional asset owners such as pension funds (with typically long-dated liabilities), insurance companies, sovereign wealth and national reserve funds have a generally low likelihood of facing liquidity shocks in the medium term, and thus can afford the required long holding periods characteristic of private-equity investment.[105]

The median horizon for a LBO transaction is eight years.[106]

Liquidity in the private-equity market

Diagram of a simple secondary market transfer of a limited partnership fund interest. The buyer exchanges a single cash payment to the seller for both the investments in the fund plus any unfunded commitments to the fund.
Main article: Private equity secondary market
The private-equity secondary market (also often called private-equity secondaries) refers to the buying and selling of pre-existing investor commitments to private equity and other alternative investment funds. Sellers of private-equity investments sell not only the investments in the fund but also their remaining unfunded commitments to the funds. By its nature, the private-equity asset class is illiquid, intended to be a long-term investment for buy-and-hold investors. For the vast majority of private-equity investments, there is no listed public market; however, there is a robust and maturing secondary market available for sellers of private-equity assets.

Increasingly, secondaries are considered a distinct asset class with a cash flow profile that is not correlated with other private-equity investments. As a result, investors are allocating capital to secondary investments to diversify their private-equity programs. Driven by strong demand for private-equity exposure, a significant amount of capital has been committed to secondary investments from investors looking to increase and diversify their private-equity exposure.

Investors seeking access to private equity have been restricted to investments with structural impediments such as long lock-up periods, lack of transparency, unlimited leverage, concentrated holdings of illiquid securities and high investment minimums.

Secondary transactions can be generally split into two basic categories:

Sale of limited-partnership interests
The most common secondary transaction, this category includes the sale of an investor's interest in a private-equity fund or portfolio of interests in various funds through the transfer of the investor's limited-partnership interest in the fund(s). Nearly all types of private-equity funds (e.g., including buyout, growth equity, venture capital, mezzanine, distressed and real estate) can be sold in the secondary market. The transfer of the limited partnership interest typically will allow the investor to receive some liquidity for the funded investments as well as a release from any remaining unfunded obligations to the fund.
Sale of direct interests, secondary directs or synthetic secondaries
This category refers to the sale of portfolios of direct investments in operating companies, rather than limited partnership interests in investment funds. These portfolios historically have originated from either corporate development programs or large financial institutions.
Private-equity firms
Main articles: Private-equity firm and List of private-equity firms
According to Private Equity International's latest PEI 300 ranking,[107] the largest private-equity firm in the world today is The Blackstone Group based on the amount of private-equity direct-investment capital raised over a five-year window.

As ranked by the PEI 300, the 15 largest private-equity firms in the world in 2024 were:

Blackstone Inc.
Kohlberg Kravis Roberts
EQT AB
CVC Capital Partners
TPG Capital
The Carlyle Group
Thoma Bravo
Advent International
Warburg Pincus
Hg
Clayton, Dubilier & Rice
Silver Lake
Hellman & Friedman
Vista Equity Partners
General Atlantic
Because private-equity firms are continuously in the process of raising, investing and distributing their private equity funds, capital raised can often be the easiest to measure. Other metrics can include the total value of companies purchased by a firm or an estimate of the size of a firm's active portfolio plus capital available for new investments. As with any list that focuses on size, the list does not provide any indication as to relative investment performance of these funds or managers.

Preqin, an independent data provider, ranks the 25 largest private-equity investment managers. Among the larger firms in the 2017 ranking were AlpInvest Partners, Ardian (formerly AXA Private Equity), AIG Investments, and Goldman Sachs Capital Partners. Invest Europe publishes a yearbook which analyses industry trends derived from data disclosed by over 1,300 European private-equity funds.[108] Finally, websites such as AskIvy.net[109] provide lists of London-based private-equity firms.

Versus hedge funds
The investment strategies of private-equity firms differ from those of hedge funds. Typically, private-equity investment groups are geared towards long-hold, multiple-year investment strategies in illiquid assets (whole companies, large-scale real estate projects, or other tangibles not easily converted to cash) where they have more control and influence over operations or asset management to influence their long-term returns. Hedge funds usually focus on short or medium term liquid securities which are more quickly convertible to cash, and they do not have direct control over the business or asset in which they are investing.[110] Both private-equity firms and hedge funds often specialize in specific types of investments and transactions. Private-equity specialization is usually in specific industry sector asset management while hedge fund specialization is in industry sector risk capital management. Private-equity strategies can include wholesale purchase of a privately held company or set of assets, mezzanine financing for startup projects, growth capital investments in existing businesses or leveraged buyout of a publicly held asset converting it to private control.[111] Finally, private-equity firms only take long positions, for short selling is not possible in this asset class.

Private-equity funds
Main article: Private-equity fund

This section needs additional citations for verification. Please help improve this article by adding citations to reliable sources in this section. Unsourced material may be challenged and removed. (August 2009) (Learn how and when to remove this message)
Private-equity fundraising refers to the action of private-equity firms seeking capital from investors for their funds. Typically an investor will invest in a specific fund managed by a firm, becoming a limited partner in the fund, rather than an investor in the firm itself. As a result, an investor will only benefit from investments made by a firm where the investment is made from the specific fund in which it has invested.

Fund of funds. These are private-equity funds that invest in other private-equity funds in order to provide investors with a lower risk product through exposure to a large number of vehicles often of different type and regional focus. Fund of funds accounted for 14% of global commitments made to private-equity funds in 2006.[112][citation needed]
Individuals with substantial net worth. Substantial net worth is often required of investors by the law, since private-equity funds are generally less regulated than ordinary mutual funds. For example, in the US, most funds require potential investors to qualify as accredited investors, which requires $1 million of net worth, $200,000 of individual income, or $300,000 of joint income (with spouse) for two documented years and an expectation that such income level will continue.
As fundraising has grown over the past few years, so too has the number of investors in the average fund. In 2004, there were 26 investors in the average private-equity fund, this figure has now grown to 42 according to Preqin ltd. (formerly known as Private Equity Intelligence).

The managers of private-equity funds will also invest in their own vehicles, typically providing between 1–5% of the overall capital.

Often private-equity fund managers will employ the services of external fundraising teams known as placement agents in order to raise capital for their vehicles. The use of placement agents has grown over the past few years, with 40% of funds closed in 2006 employing their services, according to Preqin ltd. Placement agents will approach potential investors on behalf of the fund manager, and will typically take a fee of around 1% of the commitments that they are able to garner.

The amount of time that a private-equity firm spends raising capital varies depending on the level of interest among investors, which is defined by current market conditions and also the track record of previous funds raised by the firm in question. Firms can spend as little as one or two months raising capital when they are able to reach the target that they set for their funds relatively easily, often through gaining commitments from existing investors in their previous funds, or where strong past performance leads to strong levels of investor interest. Other managers may find fundraising taking considerably longer, with managers of less popular fund types finding the fundraising process more tough. It can take up to two years to raise capital, although the majority of fund managers will complete fundraising within nine months to fifteen months.

Once a fund has reached its fundraising target, it will have a final close. After this point it is not normally possible for new investors to invest in the fund, unless they were to purchase an interest in the fund on the secondary market.

Size of the industry
The state of the industry around the end of 2011 was as follows.[113]

Private-equity assets under management probably exceeded $2 trillion at the end of March 2012, and funds available for investment totaled $949bn (about 47% of overall assets under management).

Approximately $246bn of private equity was invested globally in 2011, down 6% on the previous year and around two-thirds below the peak activity in 2006 and 2007. Following on from a strong start, deal activity slowed in the second half of 2011 due to concerns over the global economy and sovereign debt crisis in Europe. There was $93bn in investments during the first half of this year as the slowdown persisted into 2012. This was down a quarter on the same period in the previous year. Private-equity backed buyouts generated some 6.9% of global M&A volume in 2011 and 5.9% in the first half of 2012. This was down on 7.4% in 2010 and well below the all-time high of 21% in 2006.

Global exit activity totalled $252bn in 2011, practically unchanged from the previous year, but well up on 2008 and 2009 as private-equity firms sought to take advantage of improved market conditions at the start of the year to realise investments. Exit activity however, has lost momentum following a peak of $113bn in the second quarter of 2011. TheCityUK estimates total exit activity of some $100bn in the first half of 2012, well down on the same period in the previous year.

The fund raising environment remained stable for the third year running in 2011 with $270bn in new funds raised, slightly down on the previous year's total. Around $130bn in funds was raised in the first half of 2012, down around a fifth on the first half of 2011. The average time for funds to achieve a final close fell to 16.7 months in the first half of 2012, from 18.5 months in 2011. Private-equity funds available for investment ("dry powder") totalled $949bn at the end of q1-2012, down around 6% on the previous year. Including unrealised funds in existing investments, private-equity funds under management probably totalled over $2.0 trillion.

Public pensions are a major source of capital for private-equity funds. Increasingly, sovereign wealth funds are growing as an investor class for private equity.[114]

Private Equity was invested in 13% of the Pharma 1000 in 2021 according to Torreya with Eight Roads Ventures having the highest number of investments in this industry.[115]

Private-equity fund performance
Due to limited disclosure, studying the returns to private equity is relatively difficult. Unlike mutual funds, private-equity funds need not disclose performance data. And, as they invest in private companies, it is difficult to examine the underlying investments. It is challenging to compare private-equity performance to public-equity performance, in particular because private-equity fund investments are drawn and returned over time as investments are made and subsequently realized.

An oft-cited academic paper (Kaplan and Schoar, 2005)[116] suggests that the net-of-fees returns to PE funds are roughly comparable to the S&P 500 (or even slightly under). This analysis may actually overstate the returns because it relies on voluntarily reported data and hence suffers from survivorship bias (i.e. funds that fail will not report data). One should also note that these returns are not risk-adjusted. A 2012 paper by Harris, Jenkinson and Kaplan, 2012[117] found that average buyout fund returns in the U.S. have actually exceeded that of public markets. These findings were supported by earlier work, using a data set from Robinson and Sensoy in 2011.[118]

Commentators have argued that a standard methodology is needed to present an accurate picture of performance, to make individual private-equity funds comparable and so the asset class as a whole can be matched against public markets and other types of investment. It is also claimed that PE fund managers manipulate data to present themselves as strong performers, which makes it even more essential to standardize the industry.[119]

Two other findings in Kaplan and Schoar in 2005: First, there is considerable variation in performance across PE funds. Second, unlike the mutual fund industry, there appears to be performance persistence in PE funds. That is, PE funds that perform well over one period, tend to also perform well the next period. Persistence is stronger for VC firms than for LBO firms.

The application of the Freedom of Information Act (FOIA) in certain states in the United States has made certain performance data more readily available. Specifically, FOIA has required certain public agencies to disclose private-equity performance data directly on their websites.[120]

In the United Kingdom, the second largest market for private equity, more data has become available since the 2007 publication of the David Walker Guidelines for Disclosure and Transparency in Private Equity.[121]

List of private equity billionaires
Below is a partial list of billionaires who acquired their wealth through private equity.

This list is incomplete; you can help by adding missing items. (April 2024)
Name Net worth (USD) Firm Nationality
Stephen A. Schwarzman $32 billion[122] Blackstone Group United States
Henry Kravis $11.7 billion[123] Kohlberg Kravis Roberts United States
Orlando Bravo $8.7 billion[124] Thoma Bravo United States
Marc Rowan $6.5 billion[125] Apollo Global Management United States
David Bonderman $6.4 billion[126] TPG Capital United States
George R. Roberts $5.9 billion[127] Kohlberg Kravis Roberts United States
James Coulter $4.4 billion[128] TPG Capital United States
Daniel A. D'Aniello $4.2 billion[129] The Carlyle Group United States
William E. Conway Jr. $3.6 billion[130] The Carlyle Group United States
Carl Thoma $3.5 billion[131] Thoma Bravo United States
David Rubenstein $3.2 billion[132] The Carlyle Group United States
Peter G. Peterson $2.8 billion before death[133] Blackstone Group United States
Jerome Kohlberg Jr. $1.5 billion before death[134] Kohlberg Kravis Roberts United States
Conni Jonsson $1.5 billion[135] EQT AB Sweden
Harry Klagsbrun $1.1 billion[136] EQT AB Sweden
Taxes
Income to private equity firms is primarily in the form of "carried interest", typically 20% of the profits generated by investments made by the firm, and a "management fee", often 2% of the principal invested in the firm by the outside investors whose money the firm holds. As a result of a tax loophole enshrined in the U.S. tax code, carried interest that accrues to private equity firms is treated as capital gains, which is taxed at a lower rate than is ordinary income. Currently, the long term capital gains tax rate is 20% compared with the 37% top ordinary income tax rate for individuals. This loophole has been estimated to cost the government $130 billion over the next decade in unrealized revenue. Armies of corporate lobbyists and huge private equity industry donations to political campaigns in the United States have ensured that this powerful industry receives this favorable tax treatment by the government. Private equity firms retain close to 200 lobbyists and over the last decade have made almost $600 million in political campaign contributions.[137]

In addition, through an accounting maneuver called "fee waiver", private equity firms often also treat management fee income as capital gains. The U.S. Internal Revenue Service (IRS) lacks the manpower and the expertise that would be necessary to track compliance with even these already quite favorable legal requirements. In fact, the IRS conducts nearly no income tax audits of the industry. As a result of the complexity of the accounting that arises from the fact that most private equity firms are organized as large partnerships, such that the firm's profits are apportioned to each of the many partners, a number of private equity firms fail to comply with tax laws, according to industry whistleblowers.[137]

Debate
Loss of innovation and quality
When a private equity entity invests in a company, industry or public service, there have been reports of reduced quality, both in terms of services and goods produced.[138][139] While a private equity investment into a business might result in short-term improvements, such as new staff and equipment, the incentive is to maximize profits, not necessarily the quality of products or services. Over time, cost-cutting has also been common, as well as deferring further investments. Private equity investors may also be incentivized to make short-term gains by selling a company once a certain level of profitability is achieved or simply selling off its assets if that is not possible. Both of these situations, and others, can result in a loss of innovation and quality.[140][141][142][143][139][138]

Recording private equity
There is a debate around the distinction between private equity and foreign direct investment (FDI), and whether to treat them separately. The difference is blurred on account of private equity not entering the country through the stock market. Private equity generally flows to unlisted firms and to firms where the percentage of shares is smaller than the promoter- or investor-held shares (also known as free-floating shares). The main point of contention is that FDI is used solely for production, whereas in the case of private equity the investor can reclaim their money after a revaluation period and make investments in other financial assets. At present, most countries report private equity as a part of FDI.[144]

Healthcare investments
Private-equity investments in health care and related services, such as nursing homes and hospitals, have decreased the quality of care while driving up costs. Researchers at the Becker Friedman Institute of the University of Chicago found that private-equity ownership of nursing homes increased the short-term mortality of Medicare patients by 10%.[145] Treatment by private-equity owned health care providers tends to be associated with a higher rate of "surprise bills".[146] Private equity ownership of dermatology practices has led to pressure to increase profitability, concerns about up-charging and patient safety.[147][148] In a large 2024 study of 51 private equity–acquired hospitals matched with 250 controls, the former had a 25% increase in hospital-acquired conditions, like falls and central line-associated bloodstream infections.[149]

Wealth capture
According to conservative Oren Cass, private equity captures wealth rather than creating it, and this capture can be "zero-sum, or even value-destroying, in aggregate." He describes "assets get shuffled and reshuffled, profits get made, but relatively little flows toward actual productive uses."[150]

Influence on inequality
Bloomberg Businessweek states that:

PE may contribute to inequality in several ways. First, it offers investors higher returns than those available in public stocks and bonds markets. Yet, to enjoy those returns, it helps to already be rich. Private-equity funds are open solely to "qualified" (read: high-net-worth) individual investors and to institutions such as endowments. Only some workers get indirect exposure via pension funds. Second, PE puts pressure on the lower end of the wealth divide. Companies can be broken up, merged, or generally restructured to increase efficiency and productivity, which inevitably means job cuts.[4]

Why Invest in Private Equity: Insights, Pros, Cons, and Considerations
By Natalie Morehead, Updated: Nov 6, 2024

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Unlocking Potential: Private Equity Investing
Have you ever wondered if there may be investments outside of traditional markets that could help grow your investment portfolio? The secret may lie in private equity investments. If you own well-known investments like stocks, mutual funds, or ETFs, you’re most likely invested in the public markets. These types of investments are some of the most common, with the issuing company listing their investment on a public exchange so that the public can buy and sell as they please.

A much lesser-known option is to invest directly in the private markets. These opportunities have typically been less accessible to the everyday investor, but that landscape has been rapidly shifting, with many pathways recently opening with the rise of private equity investment platforms geared directly towards retail investors. Why would you invest in private equity vs a public investment? There are many compelling reasons that we’ll break down throughout this article.

Table of Contents

Where Innovation Happens
Historic Returns of Venture Capital Investments
Migration of the Unicorns: Privately Held Companies
Untapped Market
“The Efficient Frontier”, Another Reason to Believe
Optimize your Portfolio with Private Equity Strategies
Weathering the Storm
Where Innovation Happens
The traditional lifecycle of a new company begins with a group of founding members bringing a new product or service to market by first proving initial proof of concept, next creating a minimum viable product, and then, selling it to customers. We all know these types of “start up” companies, often aiming to innovate an existing industry with something better or more compelling. These companies might seek funding from various seed investors, venture capitalists, and private equity firms, depending on their stage and what can be demonstrated in sales and future growth outlook. Note that institutional private equity firms generally invest in and manage early to mid stage portfolio companies to enhance their performance and generate returns. At this early stage, receiving funding and attention from private investors and new customers is extremely competitive, hence the term “grow or die”. This makes it imperative to innovate quickly, making decisions more quickly and decisively than would typically happen at a large organization.

Eventually, as a company grows to a specific stage it might seek funding from the public, which is when it will file for an Initial Public Offering (IPO). The IPO will list on a public exchange at a pre-set opening price, which is when the public can buy it directly in exchange for ownership shares in the company. Over time, these companies can eventually grow into some of the behemoths we know today – think about Apple, Amazon, Nvidia and Microsoft. They once started from these fledgling beginnings; we’ve all heard the once-upon-a-time stories about these people sparking brilliant ideas from their garage.

But what if you could buy a company before it IPOs? When the innovation is happening at exponential levels, and before it has reached the public? Could getting in that early provide that much more upside potential? History says yes.

Historic Returns of Venture Capital Investments
According to Cambridge Associates their US Venture Capital Index, representing mid-to-late-stage private companies, has shown net returns of 28.45% over a 25-year time frame as of third quarter 2023. This is in comparison to a global public equity index such as the MSCI World/All World Country Index which returned 7.09%, or the Russell 2000, representing small-cap US equity, which returned 8.10% over the same time frame. That is an increase of 21.36% and 20.35% annual returns, respectively, demonstrating the long-term potential for more rapid wealth accumulation through diversified exposure. Although past performance can never be guaranteed and there is always risk present when investing, this data presents a case for the potential private company investing can have – higher returns compared to public markets.

Migration of the Unicorns: Privately Held Companies
In today’s market, modern companies are staying private for much longer than they used to. The median age for tech companies going public in 2000 was 5 years, compared with 15 years in 2022, according to Professor Jay Ritter at the University of Florida. The returns generated by these companies during their growth phase are typically only achievable by accessing the private market. As an investor, it can be advantageous to gain an earlier entry point to these companies by investing in private company shares. Historically private equity investors, including institutional funds, used various strategies to gain early entry into high-growth companies. They are aware that much of the early-phase, rapid, and highly valuable growth is shifting to the private market – where early investment creates opportunity.

Infographic showing the shift in value creation from public to private markets, highlighting major companies like Apple, Microsoft, Amazon, Netflix, Google, Facebook, Twitter, Airbnb, and Coinbase
Untapped Market
Institutions worldwide are increasingly turning their attention to the private markets. According to Bain & Company, as of 2023 “fewer than 15% of companies with revenue over $100 million are public,” giving public investors narrow exposure to the broader economy. So why should retail investors only get access to this narrow slice of the market? Traditional private equity funds typically have high minimum investment requirements and strict eligibility criteria, making them accessible primarily to institutions and the ultra-wealthy. Additionally, Bain & Company reports that “wealthy individuals (not to mention their advisers) are increasingly drawn to alternative investments as they look for new diversification options and better returns than they can get in the traditional markets for public equity and debt.” To address this investment gap, much attention has been recently given to this asset class traditionally only available to institutions and the ultra-wealthy, with many new platforms arising to fill the need to make private equity funds more accessible to accredited investors and other retail investors.

Bar chart showing the percentage of US companies with $100M+ in annual revenue, categorized by revenue range and public or private status.
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“The Efficient Frontier”, Another Reason to Believe
In the world of investing, it’s important to understand where you fall on the “risk/return” spectrum. Meaning, how much risk are you personally willing to take in order to get the returns needed to reach your goals? Basic investing principals state that achieving higher returns requires taking more risk. Each type of investment has its own “risk/return” profile that can be charted across a spectrum. Equities typically have higher return potential, albeit more chance of downside and volatility, while safer investments like bonds will provide lower returns, but less chance of losing money. As one nears retirement age, it’s common to decrease your risk/return profile given you’ll need the money sooner therefore want to take chances of loss off the table. Experts have charted averages across the risk/return spectrum to provide a baseline of whether you’re taking the appropriate amount of return for the appropriate amount of risk. This is known as the “Efficient Frontier” and the chart goes up and to the right. When you think about it, it’s common sense – no one is willing to take high amounts of risk for a small payoff. According to Investopedia, “portfolios that lie below the efficient frontier are sub-optimal because they do not provide enough return for the level of risk.”

Graph illustrating the Efficient Frontier, depicting the relationship between risk tolerance and rate of return.
Optimize your Portfolio with Private Equity Strategies
So, what can you do to get more potential return, without taking exponentially more risk? Research shows that by allocating a percentage of your overall investment portfolio to private equity you can increase return, while decreasing risk. How could this be? Does this defy common investment laws?

Well, private equity is somewhat non-correlated to public markets, meaning its price on average does not move exactly in tandem with public markets. Because of this, adding it to your portfolio can make it MORE efficient. When one asset goes down, the other might go up, or go down less, maintaining balance and helping weather volatility. As you can see in the chart below, adding even just a small allocation to your diversified portfolio of stocks and bonds may not only add return, but it can lower risk at the same time. Adding non-correlated other asset classes such as alternatives and private equity to long term portfolios is a strategy that is utilized by experienced financial professionals managing retail portfolios, as it contributes to diversification and risk mitigation. One must also account for the risks associated with private equity, including less liquidity and transparency in underlying financials, which is why diversification within the asset class is encouraged.

Weathering the Storm
To explain the reason adding private equity to a portfolio helps improve your risk/return profile, we look to a study conducted by Neuberger Berman’s Private Equity and Institutional Solutions Team. They analyzed historical private equity market performance during the three most recent periods of market distress, studying the major economic downturns of the early 2000s, the 2007 – 09 global financial crisis, and the 2020 COVID-related market events. The study found that “private equity historically experienced a less significant drawdown, and a quicker recovery, than public equities in all three cases.” They also noted that “historically, private equity portfolios have generally experienced shallower peak-to-trough declines than the public markets….we believe private equity broadly is positioned to weather the storm and take advantage of opportunities that arise.”

Ahah, so that is why the addition of private equity can help a portfolio sustain returns over the long-term – because in theory, it has less ground to make up after losing value during periods of economic downturns.

In summary, investing in private equity can not only provide access to an asset class that captures early value from innovation and growth, it can help optimize a diversified portfolio throughout different market cycles. Institutions and the ultra-wealthy have been accessing this market for a long time, but in today’s day and age, there are pathways opening up for the everyday retail investor. Historically, a private equity fund or institution works with their Management Team to optimize their investment portfolios utilizing asset classes outside of the public market. Thankfully, there are now options for individual investors to access such investments by investing directly in private companies. The beauty of this is that you’ve hopefully gained another tool in your belt to help fine tune your portfolio, getting you that much closer to your goals.

What are private markets?
The term “Private Markets” refers to investments in debt or equity instruments that are not traded on public exchanges. The debt and equity components of private markets are individually referred to as Private Debt and Private Equity.

Publicly accessible markets (both primary and secondary) exist in numerous countries for investments that qualify and register as public securities with the regulatory oversight body in each country. In the U.S., for example, securities offered in the public markets must be registered with the Securities and Exchange Commission (SEC).

Only a relatively small percentage of companies tend to be publicly held, so private markets usually consist of many more potential companies, though most are smaller than their public counterparts. According to Forbes magazine, less than 1% of U.S. corporations with employees are publicly traded.1

Private market investments are subject to local regulatory requirements, which often restrict buyers of such securities to high-net-worth individuals or institutional investors.

Private markets do not have formal, regulated exchanges and are instead transacted directly between interested parties. To achieve diversification, most private equity and debt investors purchase shares in funds that invest in a portfolio of private companies. Funds will generally contain either debt or equity positions so that investors can choose which of the two types serves them best.

Key Takeaways
Private markets consist of debt and equity instruments that are not publicly traded.
Private market investments provide access to innovative, high-potential companies in their early stages of growth.
Private market investments can be made directly, but are most often made by funds as part of a larger portfolio.
Private vs. Public Markets: What’s the difference?
Public Markets Private Markets
Who can access? Anyone Typically qualifying investors only
Types of companies Public companies Private companies
Available asset types Stocks, bonds, ETFs Equity, debt, real estate, closed-end funds
Minimum investment size No minimum Moonfare minimums*: €50k in Europe and Asia $75k in the US
Access to pre-IPO strategies such as venture investing, infrastructure, and buyouts Not generally available Available
Access to data on company financials Publicly available Available only to private market investors
Liquidity High Low
*The minimums mentioned are Moonfare-specific and should not be taken as accurate for outside of Moonfare.

What is Private Market Investing?
Private market investing involves equity and debt financings of private companies. Investors seek private market investments either directly or via funds as part of an alternative investment strategy that can diversify other public market investments.

Private market investments provide access to innovative, high-potential companies in their early stages of growth, thus offering investors a set of investment options that can complement public market assets and provide opportunities for higher long-term returns.

Institutional investors such as pension funds, endowments, insurance companies, and family offices have long been advocates of private market investing (See Types of PE investors for more details). Today, upwards of 25% or more of institutional assets are held in private market investments.2

Private markets have been experiencing consistent growth, with their market capitalization outpacing that of public markets on a global scale since approximately 2007. For further details, refer to Private Equity Market Size.

Private Market Investing: Benefits & Challenges
Benefits:
Higher potential returns – Data shown in the chart below was compiled from state pensions by the Chartered Alternative Investment Analysts Association (CAIA). It shows that for the 21-year period ending June 2021, private equity investments made by state pension funds outperformed public equity investments at 11.0% per year vs. 6.9%.3
Composite private equity performance across state pensions between 2000 and 2021.
Diversification – Private market assets are not highly correlated with either public equities or fixed income, making them attractive diversification prospects in portfolios with those instruments.
Choices available – Private companies represent a larger opportunity set. Less than 1% of companies in the US with employees are publicly held. The overwhelming majority are private.
Unique opportunities – Private assets often represent innovative business opportunities in their early stages.
Types of assets – Assets such as early-stage startup ventures, pre-IPO buyouts and infrastructure are generally not available in public market securities.
Challenges:
Low liquidity – There is no formal secondary market for private market assets.
Long-term investment horizons – Private assets can have time horizons of 10-15 years.
Historically difficult to access – There is no unified marketplace for private funds. In addition, many private funds are not available to individual investors, even if they are qualified to invest.
Limited access – Open only to qualifying investors.
Higher risks – Performance of private assets is typically tied to smaller and younger companies with higher failure rates than public companies.
High minimums – Some private funds may have minimums of $5-10 million or more.
Please note that the benefits and challenges explained here are not a complete list and are not specific to any individual.

How to invest in private markets with Moonfare?
Private markets have traditionally been difficult for individual investors to access, catering instead to institutional investors by imposing high minimum investments. Through its feeder fund program and online platform, however, Moonfare provides access to private market funds for qualifying investors with minimums as low as €50,000.

Moonfare also offers a secondary market opportunity through its online platform that provides an opportunity for enhanced liquidity twice each year.

Private Equity investment
by Willem Sels, Sebastien Douce
Mar 24, 2022

The momentum around alternatives is accelerating

The foreseeable rise of alternatives

Global public equity and bond markets have been volatile since the start of the year. Inflation is proving to be stickier than first thought, and markets are therefore pricing in more rapid monetary policy normalisation. Economic data and earnings momentum have become more mixed too.

Amid all of the short term uncertainty, some investors are looking at the long term approach of private markets to help ‘look through’ some of this volatility. That long term approach can also be well suited to participate in the long term trends and themes that are part of ‘Resilience Redefined’, i.e. the digital transformation, the sustainability revolution and Asia’s new growth model. These three big trends will need a huge amount of funding, which will come from the bond and equity markets, but also from private markets.

Another reason for the interest in private markets is that, in spite of the recent correction, equities and bonds are still relatively highly valued, and monetary policy normalisation may challenge those valuations. In fact, we measure the long term, annual expected return on a traditional balanced portfolio at 4.6 per cent in US dollar terms. That’s well below the current inflation level, way below historic levels, as well as what most investors require and assume, particularly given the arrival of elevated inflation. Many investors, therefore, are making greater use of alternative asset classes as an additional source of return, and our long-term return forecast for private equity is 7.4 per cent (Source: HSBC Asset Management). Diversification properties may be even more compelling considering the challenge ahead for bonds as a reliable equity hedge, given rising policy rates and some of the highest inflation readings in decades.

In a world where most asset classes are either neutrally-valued or looking rich, and where bonds don’t act as a reliable equity hedge, embedding alternatives into asset allocations is naturally becoming mainstream. In the past, alternatives were largely off-limits to most but the bigger institutional investors. This doesn’t come as a surprise since larger structures usually have more resources to assess the risk and opportunities associated to the inclusion of new asset classes in their allocations – and have the necessary scale to access more opportunities. But the hunt for yield and diversification, associated to wider product availability should continue to push more investors – of all scales - to integrate alternatives in their asset allocations. This is what we observe from our continuous dialogue with family offices. The investment industry appears to agree, with data provider Preqin, forecasting assets invested in alternatives to grow an impressive 15 per cent per year to reach USD17 trillion by 2025.

But of course, investors thinking about alternatives need to consider the higher fees and important suitability considerations, including the ability to tolerate illiquidity, outlined in more detail later in this piece. In addition, PE returns are very much dependent on manager selection and due diligence and investing in first or second quartile managers as there is considerable return dispersion between managers.

Private equity at the forefront

As illustrated below, private equity is the largest segment within the asset class. It already represents more than 40 per cent of total assets under management and is expected to represent more than half by 2025. This means that PE assets should double and reach around USD9 trillion.

Figure 1: Alternative Assets under Management and Forecast

Open In New WindowAlternative Assets under Management and Forecast, 2010 - 2026
Source: Preqin Forecasts, 2021 figure is annualized based on data to March.

Given the return and diversification benefits, investors are increasingly willing to sacrifice liquidity to benefit from new potential sources of returns. Indeed, it is rare that families need the entirety of their assets to be liquid. Some also see the opportunity to invest in new investment themes, accessing innovative companies at very early stages of their development.

Private equity is a vast, diverse and fast-growing investment universe. Consequently, not all private equity investment solutions are created equal. Venture capital, primary, secondary and co-investments all come with their own characteristics and specificities. Similarly, investing directly or via mutual funds would imply different outcomes.

The world of private equity

A commitment approach

Structurally, private equity is less liquid than its public counterpart due to the lack of active secondary markets for the assets as well as common restrictions on the transfer of individual investor interests in PE funds.

However, the lack of public shareholders means there is less regulatory burden involved in the PE market, so companies can focus on longer term strategies rather than being constrained by quarterly reporting. Yet this also means less transparency or access to information.

Therefore, when investing in private markets, PE fund managers can benefit from two additional premiums not present in listed markets - illiquidity and complexity. These two risks imply that investors are compensated for endorsing them. Like any other risk, these two can be managed with the appropriate skills and resources, making due diligence a crucial component of the selection process.

Private equity strategies

There are a variety of approaches that can be taken across different points of a company’s lifecycle, as shown in Figure 2. These strategies include:

Venture capital: Refers to investments in private companies at the earlier stages of their development that have the potential for rapid growth. The funding given to early-stage start-ups is often used to build out the operation and structure of the company, with the investor receiving a stake in the business in return. These stakes are often minority investments, allowing private companies to still retain control but benefit from the expertise and guidance of venture capitalists
Growth equity: When a company is more established as it progresses through its lifecycle, growth equity strategies come into play. Though the company is maturing and can offer goods or services at a profit, additional funding through selling a stake to a growth equity PE fund gives the company the capital required to scale up
Buyout strategy: Usually involves taking a public company private through a purchase by either a private equity firm or its existing management team. This can be funded by the existing management team (management buyout) or with a combination of equity and a significant amount of borrowed money (leveraged buyout). In comparison to growth and venture strategies, buyouts involve a change of ownership, with the management team or private equity firm holding majority control of the company in question
Turnaround or distressed strategy: Investing in distressed companies to take control with the aim of restoring the company’s profitability. This usually involves major changes to the company, both management-wise and structurally
Figure 2: Illustration of private equity strategies across a company’s lifecycle

Open In New WindowIllustration of private equity strategies across a company’s lifecycle
Source: HSBC Asset Management (January 2021). For illustrative purposes only, not to scale

Ways to access private equity

Private equity can be accessed through three main markets: primary, secondary and co-investments.

Primary markets form the foundation of private equity, involving direct investments at the time of inception of a closed-end private equity partnership. Primary investments are usually characterised by a longer investment period, and higher return potential. These closed-ended funds typically have a ten-year life within which capital received is drawn down, usually over five years, when suitable companies that fit the strategy of the fund are identified. However, due to the nature of capital being committed in advance, PE fund managers take on blind pool risk as they are unaware of the investments that will be made, and we note that performance fees detract from performance
Therefore, the secondary market can offer increased liquidity and greater visibility through acquisitions into either large portfolios of existing funds or single funds with a small number of companies remaining. Acquisitions usually take place after three years into a fund’s life, i.e. the majority of capital has already been deployed and the fund is closer to an exit. Secondaries therefore tend to offer faster deployment, accelerated return on capital, and lower risk due to early write-offs and losses. Underlying assets can be individually assessed and PE fund managers who need liquidity are able to sell their stakes in the secondary market although available valuations may be more or less favourable
Co-investments involve investors buying into a company directly alongside the PE fund manager (known as the general partner), providing a more hands-on approach for investors, allowing them to tailor their portfolio composition further. These investments are typically free of performance and management fees, giving investors the potential to get an uplift in performance

The return cycle: Straightening the J-curve

What is the J-curve

A well-documented phenomenon for investing in private equity is the J-curve. Simply put, it conveys the idea that the return and cash flow profile would be negative for the first few years of a PE investment before generally turning positive in the latter years, for reasons explained in the sections below. The takeaway is that PE investors need to be patient to wait out a period of lagging performance before they can reap the potential rewards.

Primary investments

So what causes the negative returns in the early years? First, the fund manager generally does not deploy the capital immediately when investors make an investment into a primary PE fund. Candidate companies need to be identified; due diligence research needs to be undertaken; the terms of acquisition need to be worked out – these steps take time, and all the while fees and expenses are incurring. Secondly, when capital is finally called and channelled into a target investee company, one also should not expect returns right away. For example, if the target company is one originally in distress, it would take time to reform and revive the business before it might deliver attractive returns. On the other hand, if the target company is a growth company in an early stage of development, it might need to continually require heavy capital expenditures in order to grow and gain market share, before the business could mature and turn decent profits.

A stylised J-curve of a primary PE investment is shown in Figure 3 below. Assuming a 10-year horizon, the return would remain negative until the 3-year mark, for the reasons we have mentioned above. When the fund’s acquired companies begin to deliver, the return curve finally bends upward to give its iconic J-shape.

Figure 3: Stylised J-curves for primary and secondary private equity investments

Open In New WindowStylised J-curves for primary and secondary private equity investments
Source: HSBC Asset Management (January 2021). For illustrative purposes only, not to scale

Secondary investments and co-investments

The secondary market of private equity investments exists because some primary fund investors might want to exit a fund before it runs its full course, so would sell their stakes in the secondary market. Investors buying into these so-called ‘secondaries’ could potentially avoid the negative portion of the J-curve and also commit to a shorter investment horizon. But they do so at the cost of generally lower lifetime returns for their investments. This explains the difference in the Figure 3 illustration of a return curve for a secondary investment.

A similar dynamic is in play for a co-investment, which in essence is just a secondary investment in an individual company rather than a fund. All of this brings out the main point that, as with public equities, there is a risk-reward trade-off with private equities. Some investors might be willing to stomach a deeper trough at the onset of the J-curve for better potential future returns, while others might be willing to accept lower returns in order to avoid the initial dip. For investors with a particular risk-return profile, a sensible strategy to consider would be to invest in a fund of funds that has just the right mix of primary and secondary investments to produce the profile that they desire.

Responsible investing in private markets: not an oxymoron anymore

Research by HSBC and Boston Consulting Group has highlighted small and medium sized enterprises as a ‘new front’ in the battle against climate change, with a quarter of small businesses believing that a focus on environmental sustainability will grow their business in the next 12 months. The takeaways emphasise the need for creative solutions to support the transition of SMEs to net-zero emissions, given they lack the access to capital or in-house expertise of larger businesses. Furthermore, much of the innovation to drive the net-zero transition is set to come from what are early stage companies today, with specialised technologies and solutions.

Consequently, private equity and venture capital managers can play a key role in helping businesses both participate in and drive the transition. In addition to the importance of capital to support innovation towards mitigating and adapting to climate change, there is opportunity to work closely with management to increase awareness and action on broader sustainability and ESG issues. Since private equity involves true allocations of capital, rather than just trading, as per secondary markets, PE fund managers can have much more influence over businesses when they are deciding whether to give them money, or threatening to withdraw it.

Investor suitability: Private equity is not a ‘G-rated’ asset class

Sophistication required

Movies rated G are suitable for all ages. By analogy, private equity investments are surely not a ‘G-rated’ asset class and generally require a certain level of investor sophistication. Among many reasons why PE is only suitable for highly sophisticated investors who meet the eligibility requirements, three particularly stand out – the unavailability of convenient pricing information; the lack of liquidity; the risk of not fulfilling a capital call. Further explanation of these three characteristics of PE investments are given below. Funds and fund of funds structures could provide mitigation for some of these risks particular to PE, but surely not eliminate them entirely. Therefore, it would serve family offices well to understand PE-specific risks thoroughly before deciding to commit to this asset class.

Limited pricing information

Ticker prices of actively traded public equities are available down to the millisecond. This is far from the case of private equities. A PE fund manager would estimate the valuation of its fund on a quarterly basis and update its investors accordingly. But real pricing information would not be available until the fund starts selling its acquired companies back to the market, and even then the market value of the entire fund would still not be completely known until the fund has run its full course. In short, throughout the whole life cycle of a PE fund, there is a varying degree of uncertainty to its market value. That said, the lack of always readily available price information might not necessarily be a ‘bad’ thing for investors, even if the NAV used by fund managers can differ from the true market values. Nevertheless, for those who have been familiar with continuous price quotes in the public market, this perhaps is a serious point of consideration.

Lack of liquidity

Once again drawing a contrast with public equities, when a need arises for an investor to sell its stake in a PE investment, it is much more challenging to find a buyer than is the case with an exchange-traded stock. While a secondary market does exist, the transaction process is much more involved than selling a public stock. Due to the lack of pricing information, liquidity and common restrictions on the sale or transfer of individual investor interests in PE funds, negotiations with a buying party might take weeks, also potentially resulting in a large liquidity discount to the selling price. Therefore, an investor in a primary PE investment might want to have the expectation at the onset to hold on to their stakes for the entire life of the fund, typically lasting around ten years. Prospective PE investors might want to check that this time horizon is in line with their investment objectives.

Funding risk

Generally speaking, when an investor decides to commit a certain amount to a PE fund, say 10 million dollars, it needs to put up a portion of the committed capital right away as ‘initial drawdown’. Eventually, the investor will need to inject the rest of the full committed amount into the fund, through a series of capital calls by the fund manager when attractive opportunities are identified. For our hypothetical scenario, let us assume the initial drawdown is 3 million dollars. Two years later, the fund manager finds an attractive target company it wants to acquire for the fund, and makes a capital call for 2 million dollars to the investor. If for whatever reason the investor could not fulfill this capital call, it would be seen as a ‘default’ on the investor’s initial commitment. To safeguard their own interests, fund managers usually impose strict penalties for such occurrences, ranging from relatively mild (i.e. a forced sale of the investor’s interest back to the fund manager) to severe (i.e. an investor might need to forfeit all previous capital contributed and profits generated). In our example, the investor could lose the 3 million dollars it has already put into the fund. This in essence is the ‘funding risk’ of a PE investment.

Mitigating the risks: A fund of funds structure

A fund of funds approach to investing in private equity can mitigate some of the aforementioned risks. For example, as a fund of funds usually contains a significant portion invested in secondaries and co-investments, there would be less uncertainty around its market value compared with a primary PE fund. It is also generally easier and less costly to liquidate one’s stake in a fund of funds as opposed to selling one’s interest in a PE fund. Furthermore, a fund of funds structure also brings about diversification benefits as it allows investing in a broader breadth of private companies in a wider range of industries with varying characteristics. Finally, one needs to commit substantially less capital in a fund of funds. All these and other benefits would come at the cost of higher fees, of course.

Concluding comments

With our long-term expected return forecast of 7.4 per cent, the appeal of private equity as portfolio ‘return enhancers’ has contributed to the appetite of family offices. In a context of rich equity valuations and policy rates biased to the upside, the illiquidity and complexity premia that the private equity market can provide make it an appealing prospect, at least for investors who understand the pros and cons, and can benefit from the skills and resources of a manager able to provide them with solutions that meet their specific objectives and constraints. Where suitable, we therefore generally include private assets in well-diversified portfolios: we see them as another way to capture the beta of equity or credit markets, with the potential for some alpha, while also broadening the opportunity set to issuers that may not be present in public markets.

Private Markets – A Growing, Alternative Asset Class
CONTENTS
Key Takeaways
Private markets are debt and equity investments in private companies or assets, such as private credit/debt, private equity and real assets such as infrastructure and real estate.
Assets under management (AUM) in private markets totaled $11.7 trillion in 2022, up from $10 trillion in 2021 and $7.4 trillion in 2020.
Over half of private market investments are made in private equity, but private credit/debt and real assets are growing rapidly.
Private markets are projected to reach more than $15 trillion by 2025, and more than $18 trillion by 2027.
Private markets are likely to continue growing in 2024, but more slowly.
Alternative Investment Funds Are Likely To Expand In Number And Leverage
What are Private Markets and how do they work?
Private Capital Markets, also known as Private Markets, refer to debt and equity investments in privately owned companies, as opposed to assets traded publicly, such as stock exchanges, the bond market, and commodities markets.

Private markets work by allowing investors to put money into private companies in the form of private debt or private equity, or real assets such as infrastructure, natural resources, or real estate. In return, investors receive a share in the company or asset/s and stand to make a positive return if the company performs well or the value of the asset(s) appreciates. Conversely, they also risk losing capital if the company fails or the assets depreciate.

Private markets help companies get off the ground by giving them access to much-needed capital, while also providing investors with opportunities to achieve a potentially better return than they would through public markets.

Investors are increasingly turning to the private capital markets for better returns, as these investments have outperformed public securities in recent years.

A Short History of Private Markets
Private markets have technically been around for centuries. The first private market transaction is thought to have taken place in Amsterdam in the early 1600s when a company called the Dutch East India Company raised money from private investors to fund its voyages to the Far East.

In the 1900s, private markets began to surge in popularity as a way for companies to raise money, partly due to the development of new investment mediums such as private equity and venture capital, which allowed investors to put money into private companies.

As private markets grew in popularity, several regulatory bodies began to emerge to help protect investors and ensure that companies were being truthful about their financials. The most notable of these was the Securities and Exchange Commission (SEC), created in 1934.

By the end of the 1960s, private companies had raised over $1 billion in capital through private markets, and private markets were an increasingly important part of the economy. The 1990s saw the expansion of private markets into new geographies, with countries like China and India seeing a surge in private market activity. This was helped by the growth of the Internet, which made it easier for companies to raise money from investors around the world.

Today, private markets account for trillions of dollars in investments, and they continue to grow in importance. Private markets are an important part of the global economy and are estimated to be worth more than $11 trillion.

Types/Examples of Private Markets
There are several examples of private markets asset classes that investors can use to access private companies, including private equity, private credit/debt, and real assets.

Private Equity
Private equity is a type of private market asset class that refers to the purchase and sale of ownership stakes in private companies. Private equity investments are made by private equity firms – investment funds that pool money from investors and use it to buy stakes in private companies.

There are several different types of private equity, including:

Fund of Funds
Growth Equity
Leveraged Buyouts (LBOs)
Mezzanine Capital
Real Estate Private Equity (REPE)
Venture Capital (VC)
Private equity vs private markets: what’s the difference?
Private equity is simply a subset of private markets. Private markets broadly refer to investments made in assets not available on public exchanges, including private companies, debt, and real assets, while private equity specifically refers to investments made in private companies.

Private Credit/Private Debt
Private Credit, also known as Private Debt , is a type of private market asset class that refers to the purchase and sale of loans and debt securities in private companies. There are several forms of private credit, including:

Direct lending – a form of financing provided directly by a lender to a borrower, without the involvement of a bank or other intermediary. Direct lenders typically focus on providing loans to small and medium-sized businesses (SMBs) and borrowers considered speculative/non-investment grade.
Distressed debt – provided directly by a lender to a borrower, without the involvement of a bank or other financial intermediary. Direct lenders typically focus on providing loans to small and medium-sized businesses (SMBs) and other borrowers that are considered to be below investment grade.
Mezzanine debt – a combination of senior debt and equity, often used to finance leveraged buyouts or other transactions where the borrower's credit rating is not strong enough to qualify for senior debt.
Private debt fund of funds – a type of investment fund that invests in other private debt funds, and offer investors the opportunity to gain exposure to a diversified portfolio of private debt investments, without having to invest directly in individual debt
Venture debt – provided to early-stage companies by venture capital firms, it is typically used to bridge the gap between a company's initial round of funding and its next round of financing. Venture debt lenders typically have a lower interest rate than traditional banks, but they also have a higher risk of default.
Real Assets
Real assets investing refers to the purchase of physical assets, such as real estate, infrastructure, and natural resources. Real assets can provide investors with stability and long-term returns, as they are not as volatile as traditional financial assets such as stocks and bonds.

There are several different types of real asset investments, including:

Real Estate : a type of physical asset that refers to the purchase of property such as offices, retail space, apartments, and industrial buildings. Private Market Real Estate investments can provide investors with stability and long-term returns, as they are not as volatile as traditional financial assets such as stocks and bonds. Real estate investments can be made through private real estate funds or public real estate markets.
Infrastructure: a type of physical asset that refers to the purchase of transportation networks (e.g. roads, bridges, airports), communication networks (e.g. telecommunications networks, data centers), or utility systems (e.g. water treatment plants, energy pipelines). Private Market Infrastructure investments can provide investors with stability and long-term returns, as they are not as volatile as traditional financial assets such as stocks and bonds. Infrastructure investments can be made through private infrastructure funds or public infrastructure markets.
Natural Resources: a type of physical asset that refers to the purchase of commodities such as oil, gas, coal, gold, silver, and copper. Private Market Natural resources investments can be made through private natural resources funds or public natural resources markets. Each type of investment has its unique characteristics and benefits. Natural resources can provide investors with stability and long-term returns, as they are not as volatile as traditional financial assets such as stocks and bonds.
What is Private Market Investing?
Private market investing typically includes pension funds, insurance companies, private equity firms, and venture capitalists which invest in private companies through private equity funds, venture capital funds, and private debt funds.

Private market investments are typically made via a private markets fund arranged as limited partnerships, with investors referred to as Limited Partners, or LPs, and investment managers referred to as General Partners or GPs.

The Private Markets Lifecycle
The private markets lifecycle is the process by which private equity funds are created, raised, invested, and eventually liquidated. The private markets lifecycle typically takes 7-10 years to complete, although the exact timeline can vary depending on a fund's investment strategy and market conditions. It typically consists of five stages:

Fundraising
Capital deployment
Portfolio monitoring
Portfolio administration
Value realization
During private market fundraising, the general partner (GP) of a private equity fund raises capital from institutional investors, such as pension funds, endowments, and insurance companies. This process can often take several years.
Once the private fund has been raised, the GP will begin capital deployment: investing in portfolio companies. These companies can be at any stage of development, from early-stage startups to mature businesses.

In portfolio monitoring, a GP will work closely with the portfolio companies to help them grow and improve their performance. This could involve providing strategic guidance, operational support, and further capital.

Portfolio administration involves managing the day-to-day operations of a private equity fund's portfolio, including tracking investment performance, monitoring portfolio companies, managing capital calls and distributions, preparing financial reports, and complying with regulatory requirements.

Value realization , also known as an exit, happens once a GP believes that a portfolio company has reached its full potential. An exit is typically done through an IPO, sale to another company, or recapitalization.

Once a GP has exited all of the investments in a fund, the fund is liquidated and the proceeds are returned to investors.

What are some of the potential benefits of private markets investing?
For Investors:
Higher potential returns and more stability. Private markets are typically less volatile than public markets, which is why investors might consider them a safer investment option.
They offer investors the opportunity to get in on the ground floor of promising companies.
Diversification. The bulk of the economy consists of private market investments. Therefore, this asset class offers access to a wide range of alternative sources of risk and return. For example, companies in the growth phase are typically not traded on a stock exchange and are therefore not part of a traditional portfolio. Private equity funds make it possible to include such investments in an allocation.
For Companies:
Private investment can help provide vital capital for companies, including start-ups looking to grow their business. As bank finance has declined along with the number of publicly-listed companies, there has been a growth in unlisted companies seeking investment capital.

For Governments:
Helping governments to meet objectives on infrastructure and net zero initiatives.
Allow governments to create jobs while simultaneously reducing public spending.
Private Markets Regulation
How Are Private Markets Regulated?
Private market regulation varies depending on the asset class. Both Private Debt and Equity investments in private companies are regulated by the SEC and FINRA in the United States, while private debt investments are regulated by the MPRA in the United Kingdom.

FINRA (Financial Industry Regulatory Authority) is a self-regulatory organization that regulates the securities industry in the United States. It is responsible for enforcing both Regulations D and A, as well as other regulations that apply to private markets.

The MPRA is a regulatory authority that oversees private debt investments in the United Kingdom. It is responsible for enforcing the regulations that apply to private debt markets, including rules about disclosure, minimum investment amounts, and restrictions on who can invest.

Debt investments in private companies are subject to Regulation D of the Securities and Exchange Act of 1933. This regulation prohibits general solicitation or advertising of securities and requires that all offers be made through a Private Placement Memorandum (PPM).

Equity investments in private companies are subject to Regulation A of the same act (Securities and Exchange Act of 1933). This regulation exempts private companies from registration with the SEC, as long as they meet certain requirements, such as making their financial information available to investors.

Private Markets vs Public Market Investing
What’s the difference between private vs public market investing?
Private market investing and public market investing both offer a range of benefits to market participants, but there are many differences in private markets vs public markets in terms of regulation, liquidity, information availability, and more.

Private vs public markets: a quick comparison
Characteristic

Private Markets

Public Markets

Accessibility
Restricted to accredited and institutional investors
Open to all types of investor
Liquidity
Illiquid, meaning it can be difficult to sell assets quickly
Liquid, meaning assets can be easily bought and sold
Transparency
Less information available to investors,
More transparent, with more information available to investors
Regulation
Less regulated than public markets
Highly regulated
Fees and investment minimums
Typically higher fees and investment minimums than public markets
Typically have lower fees than private markets
Potential returns
Typically higher returns than public markets. Average U.S. private equity return was 10.5% from 2002-2022.
The S&P 500, widely regarded as the best single gauge of large-cap U.S. equities, provided an average return of 9.8% from 2002-2022.
Market size
Approx. $11.7 trillion in 2022
Approx. $125 trillion in 2022
Private Market Size
How big are private markets in terms of assets under management (AUM)?
As of June 2022, total private market assets under management (AUM) totaled more than $11.7 trillion globally across all asset classes, up from $10.7 trillion at the end of 2021. Furthermore, there was over $3 trillion in dry powder – cash that's been committed by investors but has yet to be allocated to specific investments.

The growth in private markets is due to increasing demand from investors for high-yield and private equity investments, as well as the growth of private credit/debt markets.

Private Market AUM by Region
More than half of global private markets AUM is invested in North America, with an estimated $6 trillion, followed by Europe with $2.8 trillion, Asia-Pacific with $2.2 trillion, Latin America with $0.4 trillion, and the Middle East and Africa with $0.3 trillion.

Region

AUM (USD trillion), 2022

Percentage of total AUM

AUM (USD trillion), 2021

2021 to 2022 growth

North America
6.0
51.3%
5.1
17.1%
Europe
2.8
24.0%
2.4
15.3%
Asia Pacific
2.2
18.8%
1.9
13.9%
Latin America
0.4
3.4%
0.4
12.8%
Middle East and Africa
0.3
2.5%
0.3
11.7%
Private Market AUM by asset class
The private market continues to be dominated by private equity, with $7.6 trillion globally in AUM as of mid-2022, followed by private debt ($2.4 trillion) and real assets ($1.3 trillion).

Asset Class

AUM (USD trillion), 2022

Percentage of total AUM

AUM (USD trillion), 2020

2020 to 2022 growth

Private Equity
7.6
65%
6.3
21%
Private Debt/Credit
2.4
20.5%
1.9
26%
Real Assets
1.3
11.1%
0.9
44%
Other
0.4
3.4%
0.3
33%
Private Market Trends and Outlook
Private markets are projected to reach more than $15 trillion by 2025, and more than $18 trillion by 2027. The strong growth of private credit/debt, real assets, and secondary markets is expected to continue.

Private equity outlook
Many of the private equity trends experienced in 2023 are expected to continue in 2024, including slow fundraising, elevated interest rates, a macroeconomic outlook clouded by conflict and geopolitical tension, according to S&P Global Market Intelligence’s private equity 2024 outlook.

Private equity exits fell sharply from 2021 to 2023, but there were signs of a rebound in late 2023. While this is positive news for PE markets, the difficult deal environment won’t disappear overnight and as of November 2023, the number of PE entries were tracking for their lowest annual total since at least 2019. There is, however, a record $2.59 trillion in record dry powder waiting to be committed.

Creative deal structures and a relentless focus on value creation in private equity portfolios could be critical in the coming year.

Private credit outlook
Private credit markets are projected to continue growing in 2024, albeit at a slower pace than in previous years, due to uncertain interest rates and the possibility of a US recession.

Larger issuers, middle-market, and private credit CLOs are expected to intensify activity, with alternative investment funds (AIFs) expanding in both number and leverage. Business development companies (BDCs) may encounter volatile valuations, and certain portfolio companies could struggle due to earnings pressure and higher interest costs. Meanwhile, speculative-grade issuers may have trouble servicing debt in the face of rising costs and strained earnings, which will turn challenges for borrowers into opportunities for lenders.

Both General Partner (GP)- and Limited Partner (LP)-led secondary strategies are expected to be in high demand, and valuations in private markets may become more volatile due to the macroeconomic environment.Real assets outlook.

Infrastructure and real estate fundraising fell from 2022 to 2023. Global infrastructure fundraising in particular hit its lowest level in six years, while real estate fundraising and deal flow have decreased to new post-COVID lows.

For real estate, higher interest rates, weak office demand and falling property valuations pose significant risks in 2024. There is a worry in the investment community that office and retail real estate could come under stress following the rise of home working since the pandemic, pushing workers away from urban centers. An upcoming wave of refinancing could further impact the value of investments and transaction activity.

For infrastructure, while rising interest rates and an economic slowdown have made capital more expensive and scarce (driving an overall decline in fundraising), global megatrends such as digitalization, decarbonization and deglobalization are driving new infrastructure investment opportunities.

Private Market Solutions
Get transparency into private capital flows, centralized portfolio management, and reporting to achieve greater operational efficiency with our end-to-end private markets solutions

The secondary market for private company stock has emerged as an economically vital ecosystem for millions of U.S. private company employees and institutional investors. A steady and dramatic trend of the past 20 years is that companies are waiting longer to IPO, from roughly five years in 2000 to nearly 12 years today. As a result, the size of the private market has grown to a staggering size, rivaling that of the U.S. municipal bond market. With over 1,400 unicorns globally valued at approximately $4 trillion according to the Crunchbase Unicorn Board, the private market now rivals the public market in significance to the economy, yet it lacks the basic infrastructure and fundamental plumbing to allow it to function efficiently.

Nasdaq Private Market: bridging the gap in the private market
As the secondary market for private company stock grows, trusted platforms like NPM SecondMarketTM can assist counterparties across the ecosystem. As a comprehensive solution for private stock trading, SecondMarket aims to provide accurate data, streamlined trade lifecycle management, transparency, and reliability for market participants. With a decade supporting clients in the private markets, the company has executed over $50 billion in transaction volume since inception, year to date it has seen more than $4 billion in secondary trading activity. This platform not only brings much-needed order and confidence to a rapidly expanding market but also empowers employees and investors with the tools and information necessary to make informed trading decisions.

Data and guidance
The importance of accurate trade and private company data cannot be overstated in a market where valuations can sometimes be opaque and inconsistent. NPM offers detailed information on share value, helping employees and investors build confidence and achieve fair market execution for their shares. NPM helps clients navigate secondary trading and execute private company stock transactions. The platform’s intuitive technology and experienced team make the onboarding, execution, and settlement process seamless.

Trade lifecycle management: transfer and settlement of shares
In the public markets, trades now settle quickly and investors typically aren’t concerned about settlement risk. In the private markets, the opposite is true. Trades often take months to settle. Friction is typically normal throughout the execution of trades. Employees, investors, and designated private company equity administration personnel can be left to navigate on their own how to transfer shares and access funds. NPM offers a settlement service to private companies and investors to ensure a more efficient process that can cut settlement times down to a week. By managing the entire process from end-to-end, NPM reduces risk and uncertainties throughout the trade lifecycle.

Transparency + fees
Transparency is crucial for private market participants. Unlike the public markets, the private market lacks a consolidated tape, making it difficult to determine real-time private stock prices. NPM addresses this by aiding sellers in researching recent funding rounds and secondary trade history to ensure fair pricing when buyers and sellers want to transact. Some liquidity providers in the private market often take advantage of the lack of information about share value and fees. They may charge exorbitant fees for buyers and sellers to transact on their platforms, which can be as high as 8%. Alternatively, NPM operates a trusted marketplace with low fees and high integrity, helping sellers understand the fair market value of their shares and offering a flat, 1% commission fee on all trades.

Reliable buyer network
The extensive NPM network of institutional investors includes a roster of some of the largest and most sophisticated buyers of private shares in the world. This is augmented by NPM’s ownership structure, which includes a number of the largest and most well-respected banks and asset managers in the world such as Allen & Company, Bank of America, BNP Paribas, Citi, DRW Venture Capital, Goldman Sachs, HiJoJo Partners, Morgan Stanley, UBS, and Wells Fargo. This powerful global network of investors offers employees one of the best possible opportunities to market their shares and achieve fair market value for them, which can deliver a more efficient trading experience for all trade counterparties.

Maintaining company oversight
Unlike the public markets, private company share transfers require company approval for all trades. NPM allows companies to retain complete control and oversight over all transactions executed on the platform. In parallel, NPM’s advanced trading technology supports employees in navigating the company approval processes, automating each step and thoroughly verifying completion of each required authorization. Deploying advanced secondary trading technology such as SecondMarket helps users of the NPM platform sell shares seamlessly.

Supporting a $4 trillion market
The rise of the secondary market for private company stock signals a pivotal shift in the financial landscape. As the private market swells in size, millions of private company employees rely on these markets to generate liquidity that funds important life events such as buying houses, paying tuitions, and investing in new businesses. Given their rapid growth, the private markets may be the future of the capital markets. Platforms like NPM are therefore crucial in providing the necessary infrastructure and transparency to power this rapid growth and increasingly critical need.

VentureBeat newsroom and editorial staff were not involved in the creation of this content.

How to Sell Shares of a Private Company
Articles

October 11, 2023
Upd on June 17, 2024
Reading time
9 min

12020
How to Sell Shares of a Private Company.
Stock trading is one of the oldest forms of financial trading in business, where traders can buy and sell shares of company stocks. However, private companies’ shares are treated differently than publicly listed ones. Private companies’ shares are not found in famous stock exchanges like NYSE or LSE and are less common than public share trading. Selling private company shares is somehow complicated and involves several considerations.

The good news is that you can sell private shares, but it takes a different route, which we will explain in the following.

Key Takeaways
Private shares are not traded in public secondary markets like public companies. Instead, they are sold privately to investors.
Private companies may issue and sell shares to raise funds through angel investors, venture capitalists, accelerator programs and other fundraising methods to increase operating cash flow.
Employees holding private company shares can sell their shares back to the company or externally to investors and institutions.
Private companies do not need to comply with the SEC’s requirements and are not required to disclose their reports like public companies.
Saudi Aramco (Petroleum company) holds the record for the largest IPO of all time, with $25.5 billion raised from going public in 2019.

Fast Fact
What Are Private Shares?
Shares are parts of a company’s overall value and equity, and their price performance reflects the company’s activity. Companies start as private entities with privately held shares before announcing them to the public and trade stocks in secondary markets and exchanges.

However, unlike publicly traded companies, private shares are not traded in secondary markets, and retail traders cannot buy private shares. Companies may issue privately held shares to raise funds, attract investors, or as a part of an internal shareholders program.

Additionally, since private shares are not publicly traded, they do not need to comply with the Securities and Exchange Commission. Therefore, only institutional investors and firms can trade private stocks.

Private Shares vs. Public Shares
Private companies issue a small number of shares compared to publicly listed companies. Therefore, their stock price does not fluctuate so much, and it would only change based on the company’s performance and overturn.

However, public corporations issue a large amount of shares that numerous individuals and institutions hold. Therefore, their stock price changes according to supply and demand factors, besides corporate valuation and reports.

Additionally, trades can find public shares on secondary markets and exchanges, while private shares are privately traded.

In order to buy a private company’s shares, a trader or a company must be accredited by the SEC and meet certain requirements involving net worth and source of income. These conditions may include having a $200,000 net worth of working in the finance industry.

Why Sell a Private Company Shares?
There are several reasons a private company would offer their shares for sale. Startups and newly emerging companies tend to offer their shares to investors, institutions, and financial firms as part of their fundraising efforts.

Small companies usually have limited resources and rely on fundraising campaigns to generate liquidity and proceed with business operations pay salaries, and work software.

Additionally, private companies may offer their shares to partners as collateral, attracting a strategic partnership that boosts their performance and returns in exchange for private company shares.

Private company shares can also be used in employment loyalty or equity share programs, retaining employees and motivating them by offering a piece of the company’s equity.

Can a Private Company Sell Shares To The Public?
Private companies cannot sell their shares to secondary markets and exchanges like public companies. You are unlikely to find any private company’s shares on the stock exchange.

Private corporations do not need to meet the requirements of the SEC. Therefore, they are not listed on stock exchanges and are not required to disclose their reports and financial statements to the public, unlike public companies that must publish their reports regularly.

How To Sell Stocks Of a Private Company
Private stocks can be bought and sold, but not as easily as public shares. However, if a company decides to go public and sell their shares in secondary markets, or an employee wishes to sell their equity, there are few ways to do so.

Public Sale
A company may wish to go public and comply with the US Securities and Exchange Commission, conduct an IPO process, and list its shares for the general public. Selling shares on the stock exchange benefits companies to raise more funds and awareness about their business, especially if they succeed as a private entity and wish to expand their recognition and focus on the long term.

Companies also go public to raise more funds from a larger pool of investors and traders in different stock exchanges and marketplaces. However, this step requires comprehensive regulatory compliance, including periodic reports of their performance and finances.

Private Investors
Private companies may sell their shares to individual or institutional traders. Selling to private investors can be advantageous since SEC compliance is not required, and private corporations can engage with angel investors, funds, accelerators, and more ways to raise funds.

Independent investors and entrepreneurs may also be interested in buying a private corporation’s shares, and they can be a valuable source of funds for private entities.

Employees
Sharing a company’s equity among employees is becoming an increasingly used method by companies to attract and retain employees. Since small companies and startups are limited on funds, they use this approach as compensation for their employees.

Stocks can also be offered to employees as a part of the bonus system to ensure the employees stay at the company, hoping the company will grow and the stock price will increase.

Buy-Back Programs
Companies that offer equity shares to their employees may offer a buy-back system, where the company purchases the shares from employees.

Employees may use this opportunity for monetary compensation. However, this approach is quite rare because companies are basically offering these shares because they are short on money.

Special Considerations For Selling Private Stocks
Private shares are treated differently than public shares as they are not as common as public ones, where anyone can buy any stock in secondary markets. Therefore, there are some factors that you need to consider.

Pre-IPO Shares
Private companies and startups may consider going public and filing for an Initial Public Offering (IPO), where the shares become publicly traded on secondary markets and stock exchanges.

When the company announces its intention to do so, it raises funds in pre-IPO markets, raising capital from venture capitalists and institutional investors who are interested in that company’s shares.

Institutional and individual investors may buy pre-IPO shares, hoping the price will rise once their stocks are publicly traded, where they can resell in secondary markets for a higher price and make some gains.

Therefore, the company’s shareholders, like employees, can seize this opportunity and sell their shares and holdings in several pre-IPO private shares markets, where prices are higher than non-pre-IPO stocks.

Non-Pre-IPO Shares
Institutional investors and ventures find it challenging to get around non-pre-IPO stocks, where private companies do not intend to go public. Therefore, the interest in these companies is driven either by their successful business model or by the investor’s speculation about the company’s future.

There is no market to buy and sell no-pre-IPO companies’s shares, and investors looking to buy those may contact the issuing firms about the availability of shares or if they repurchased shares from existing shareholders.

Entrepreneurs and investors who want to buy these stocks may also benefit from employees’ knowledge of the current shareholders and try to purchase shares from them or directly from the private company.

Organisational Restrictions
Unlike public shares, private shares have few restrictions regarding ownership and transfer of ownership. Therefore, if you hold shares in your private company, you must ask permission from your company first before offering your shares to an investor or an outsider buyer.

The company has the right to refuse your offer to sell externally and may offer you buy-back programs, where they purchase the stock back from you according to their policies and valuation.

Alternatively, if the company agrees that you sell your shares externally through tenders or in other ways, you can go ahead and find investors to buy your shares. However, ensure that you meet any conditions the company may set, like holding the shares for specific periods before selling them or the number of shares you are allowed to sell.

Spread
The spread is the difference between the selling (asking) and the buying (bidding) price, which is something you need to consider when selling your private shares in secondary markets or to investors.

For example, if a stock is worth $150 and the highest bid you receive is $140, the spread is $10. This might seem a tiny difference, but the number will accumulate if you have multiple shares, and you may realise considerable losses.

On the one hand, looking for a higher and best bid in the market is better. On the other hand, investors are not always willing to match your expectations because of the risky nature of private shares, and you may miss your opportunity to sell with a loss by not selling at all.

Steps To Sell Private Company Shares
If you have found the opportunity and were approved to sell your privately held shares in secondary markets or to external investors, it is time to determine the value of your shares and where you can sell them.

Stock Price Valuation
Since private shares are not listed in public markets, it is challenging to determine their value in the absence of supply and demand and market dynamics.

The issuing firm may set a stock value, and you may use this valuation when selling private shares. However, there are other ways to determine the value of your shares.

Internal Rate of Return (IRR)
IRR analysis is a complex financial tool that measures the profitability of an investment, which is one way to evaluate the stock value. The higher the IRR, the better the investment is in that share, which gives you a direction of where you should be going with pricing your stock.
The calculations are more complicated because they include debts, business performance, economic status, and the company’s market share.

Discounted Cash Flow Analysis
The discounted cash flow analysis is a standard financial model that measures the company’s ability to generate cash in the future.
The concept determines if investing in that company is beneficial or not based on its potential to generate cash flow in the future. If the analysis is positive and a company has an excellent cash flow generation potential, it is a positive signal that a stock should be more valued.

Comparable Public-Shares Value
Finding a publicly traded company of a similar business is one of the easiest and most common ways to estimate the value of a private company’s stock price.
This way, a shareholder gets a realistic view of the stock price and how much an employee would ask to sell their shares in the market or to an investor.

Stock Placement
Private stocks are not placed in public stock exchanges and secondary markets. However, there are private placements where private companies can sell their shares to qualified investors and entrepreneurs.

This way, private entities can raise funds and sell their shares without going public, which involves complying with the SEC and reporting financial statements to the public.

Therefore, private companies find private placements valuable to sell their shares, especially if their business has excellent potential and attracts venture capitalists and institutional investors.

However, private markets are not liquid, and it may not be easy to sell the shares because only a limited number of investors, financial firms, and high-net-worth individuals make it to the private placement market.

In this case, a company may need to settle with the best bidder price when selling a stock, even if that results in a considerable spread or loss if they want to increase liquidity.

Conclusion
Selling private company shares is challenging and less flexible than publicly traded companies. Public shares are listed in secondary markets, where many traders and individuals can buy and sell shares, and the stock price fluctuates based on market conditions and business activity.

However, private shares are sold in private placement markets to a selected list of investors, venture capitalists and wealthy individuals who may be interested in the company’s business model or profitability.

FAQ
Can a private limited company sell its shares?
Yes. However, private shares are not sold in secondary markets and stock exchanges like publicly traded companies. Private shares are sold to institutional investors and venture capitalists privately or through private placement markets to a selected group of qualified investors.

How do I value the shares that I own in a private company?
There are several ways to evaluate a private stock price. Comparable public companies are one of these ways, by comparing the private company to a publicly traded company and comparing the prices. Other ways include IRR analysis and discounted cash flow financial analysis.

How do shares work with a private company?
Private companies may issue shares for stakeholders, including current investors and employees. Also, private companies may sell their shares in private placements and markets to raise capital to run their business or offer their stocks to angel investors, venture capitalists, accelerators and other financing ways that keep their business running.

How do I sell shares in a privately owned company?
Employees can sell their shares in a private company, but they need approval from their company first (the issuing firm). The issuing company may buy back the shares or allow an employee to sell their shares to external investors and financial institutions.


Q1: What User Segments Would You Create Out of Hiive’s Customer Groups?
To effectively implement Salesforce and drive operational excellence at Hiive, it is crucial to segment the customer base into distinct user groups. Based on Hiive’s primary customer groups—Issuers, Investors, and Sellers—the following user segments are proposed:

1. Issuers (Private Companies)
a. Early-Stage Startups
Characteristics:
Recently founded with limited operational history.
Seeking to provide liquidity options for employees and early investors.
High-growth potential with scalable business models.
Needs:
Efficient mechanisms to facilitate secondary sales.
Access to a network of accredited investors.
Strong compliance and regulatory support.
b. Growth-Stage Private Companies
Characteristics:
Established businesses with consistent revenue streams.
Looking to expand operations, enter new markets, or make strategic acquisitions.
Needs:
Enhanced liquidity solutions for a broader range of stakeholders.
Integration with Salesforce for streamlined operations and investor relations.
Detailed analytics and reporting on secondary transactions.
2. Investors
a. Institutional Investors
Sub-segments:
Venture Capital Firms
Focus on high-growth startups and innovative sectors.
Private Equity Firms
Interested in mature private companies with stable cash flows.
Family Offices
Diversifying portfolios with alternative investments.
Characteristics:
Significant capital under management.
Expertise in evaluating and managing investments.
Needs:
Comprehensive access to high-potential investment opportunities.
Robust due diligence tools and reporting capabilities.
Seamless integration with Salesforce for portfolio management.
b. Accredited Individual Investors
Characteristics:
High-net-worth individuals seeking diversification.
Interested in accessing exclusive investment opportunities.
Needs:
User-friendly platform for managing investments.
Transparent and detailed information on potential investments.
Personalized investor support and relationship management.
3. Sellers
a. Employees and Founders
Characteristics:
Hold equity through stock options, RSUs, or direct share ownership.
May seek liquidity for personal financial planning or diversification.
Needs:
Secure and compliant mechanisms to sell shares.
Clear communication and support throughout the selling process.
Integration with Salesforce to track and manage their transactions.
b. Early-Stage Investors and Shareholders
Characteristics:
Initial backers of the company with significant equity stakes.
Looking to realize returns on their early investments.
Needs:
Efficient and transparent secondary market transactions.
Comprehensive reporting on transaction outcomes.
Relationship management tools to maintain engagement with issuers and other investors.
Q2: What Essential Fields and Critical Information Would You Capture in a CRM System for Each User Segment You've Identified?
Implementing Salesforce effectively requires capturing tailored information for each user segment to ensure personalized engagement, efficient management, and compliance. Below are the essential fields and critical information for each identified segment:

1. Issuers (Private Companies)
Core Information:
Company Name
Industry/Sector
Company Stage (Early-Stage, Growth-Stage)
Location
Website URL
Contact Person: Name, Title (e.g., CEO, CFO)
Contact Information: Email, Phone Number, LinkedIn Profile
Operational Details:
Number of Employees
Annual Revenue
Funding History: Previous rounds, amounts raised, lead investors
Equity Structure: Percentage of equity available for secondary sales
Transaction Specifics:
Desired Liquidity Options: Types of secondary transactions (e.g., employee sell-offs, strategic investor acquisitions)
Valuation Metrics: Current valuation, growth projections
Compliance and Regulatory Information: SEC filings, if applicable
Engagement Metrics:
Interaction History: Meetings, communications, inquiries
Pipeline Stage: Lead, Opportunity, Negotiation, Closed-Won/Lost
2. Investors
a. Institutional Investors
Firm Name
Type: Venture Capital, Private Equity, Family Office
Key Contacts: Partner names, Titles, Contact Information
Investment Focus: Preferred industries, stages, and geographies
Fund Details: Fund sizes, vintage years, committed capital
Portfolio Information: Current investments, performance metrics
Engagement History: Past interactions, meetings, proposals reviewed
b. Accredited Individual Investors
Investor Name
Contact Information: Email, Phone Number, LinkedIn Profile
Accreditation Status: Verification of accredited investor criteria
Investment Preferences: Desired industries, stages, investment sizes
Portfolio Overview: Current holdings, past investments, performance
Engagement Metrics: Communications, event attendances, requests for information
3. Sellers
a. Employees and Founders
Seller Name
Role in Company: Employee, Founder, Executive
Equity Details: Type of equity (RSUs, Stock Options, Direct Shares), Number of Shares
Vesting Schedule: Vesting dates, cliff periods
Selling Preferences: Desired sale amounts, timing, conditions
Contact Information: Email, Phone Number
Transaction History: Past sales, realized gains/losses
b. Early-Stage Investors and Shareholders
Investor Name
Equity Holding: Number of shares, percentage ownership
Investment Details: Date of investment, amount invested, valuation at time of investment
Exit Preferences: Desired exit strategies, timelines
Contact Information: Email, Phone Number
Transaction History: Previous sales, valuation benchmarks
Q3: What Are the Relationships Among the Customer Groups and User Segments You’ve Provided?
Understanding the interconnections among Issuers, Investors, and Sellers is pivotal for optimizing Salesforce implementation and fostering a synergistic ecosystem. The relationships can be delineated as follows:

1. Issuers ↔ Investors
Investment Flow:
Issuers seek funding and liquidity solutions by offering equity or debt instruments.
Investors provide capital to issuers in exchange for equity stakes, aiming for returns through growth and eventual exit events (IPO, acquisition).
Ongoing Engagement:
Issuers maintain relationships with Investors for continuous support, guidance, and potential future funding rounds.
Investors engage with Issuers to monitor performance, provide strategic advice, and facilitate growth.
2. Issuers ↔ Sellers
Equity Management:
Sellers (Employees, Founders, Early Investors) hold equity stakes in Issuers and may seek liquidity by selling shares.
Issuers facilitate secondary transactions by providing platforms and mechanisms for sellers to liquidate their holdings without disrupting operational equity structures.
Compliance and Oversight:
Issuers ensure that all share sales comply with regulatory requirements and internal policies, maintaining control over who can acquire additional shares.
3. Investors ↔ Sellers
Secondary Market Transactions:
Investors participate in the secondary market by purchasing shares from Sellers, thereby increasing their portfolio diversity and investment opportunities.
Sellers provide liquidity by offering their shares to Investors, allowing them to realize returns on their equity holdings.
Data and Analytics:
Investors leverage data from secondary transactions to inform investment strategies and identify trending opportunities.
Sellers use insights provided by Investors to make informed decisions about when and how much to sell.
4. Overall Ecosystem Dynamics
Value Creation:
Issuers grow and increase in valuation due to investments from Investors, enhancing the value of equity held by Sellers.
Investors benefit from the appreciation of their investments and the liquidity options provided by Sellers.
Sellers realize financial gains through the liquidity facilitated by Investors, incentivizing participation in the Hiive marketplace.
Feedback Loops:
Successful transactions between Investors and Sellers enhance the attractiveness of the Hiive platform to Issuers, Investors, and potential Sellers, fostering a robust and growing marketplace.
Q4: Using Your Findings from the Previous Questions, Propose an Initiative to Boost Investor Activity on the Platform
To significantly enhance Investor Activity on Hiive’s platform, a comprehensive initiative leveraging Salesforce’s capabilities is proposed. This initiative focuses on Targeted Engagement, Personalized Communication, and Streamlined Transaction Processes to attract and retain institutional and individual investors.

Initiative: "Hiive Investor Acceleration Program"
1. Proposed Messaging
Value Proposition:
"Unlock exclusive investment opportunities in the world’s most promising pre-IPO companies."
"Diversify your investment portfolio with high-growth potential assets available only on Hiive."
"Experience seamless and secure secondary market transactions tailored to institutional and accredited investors."
Key Benefits:
Access to a curated selection of high-potential private companies.
Enhanced liquidity options without the complexities of traditional secondary markets.
Comprehensive data analytics and reporting for informed investment decisions.
2. Salesforce Tools Utilized
Sales Cloud:
Lead Management: Capture and track potential investor leads from multiple channels.
Opportunity Tracking: Manage and monitor investment opportunities through various stages.
Relationship Management: Maintain detailed records of interactions with each investor segment.
Marketing Cloud:
Targeted Email Campaigns: Deliver personalized content to different investor segments based on their preferences and behaviors.
Automated Workflows: Streamline marketing processes to nurture leads effectively.
Salesforce Engagement Tools:
Sales Dialer: Enable efficient outbound communication with prospective investors.
Sales Engagement: Foster meaningful interactions through tailored communication strategies.
Analytics and Dashboards:
Performance Tracking: Monitor key metrics such as investor registrations, active investments, and transaction volumes.
Segmentation Analysis: Gain insights into the effectiveness of different engagement strategies across segments.
3. Criteria for Identifying Investors
Institutional Investors:
Investment Focus: High-growth sectors, unique pre-IPO opportunities.
Fund Size: Ability to commit substantial capital (e.g., multi-million-dollar funds).
Geographical Presence: Investors with a global reach or specific regional interests aligned with Hiive’s offerings.
Accredited Individual Investors:
Net Worth: Individuals meeting SEC’s accredited investor criteria.
Investment Preferences: Sectors and stages that align with Hiive’s curated listings.
Past Investment Behavior: Individuals with a history of investing in private markets or secondary sales.
4. Steps to Execute the Initiative
a. Segmentation and Profiling:
Utilize Salesforce to create detailed profiles for each investor segment, incorporating demographics, investment history, and preferences.
Develop Buyer Personas to tailor communication and engagement strategies effectively.
b. Targeted Marketing Campaigns:
Design segmented email marketing campaigns in Marketing Cloud, highlighting relevant investment opportunities and success stories.
Implement Behavioral Triggers to send personalized content based on investor interactions and engagement levels.
c. Educational Webinars and Events:
Host exclusive webinars and virtual events to educate investors on the benefits of Hiive’s platform and showcase high-potential investment opportunities.
Use Salesforce to manage event registrations, follow-ups, and post-event engagement.
d. Personalized Investor Dashboards:
Develop Salesforce dashboards tailored to each investor segment, providing real-time insights into their portfolio performance, available opportunities, and transaction history.
Enable investors to set Investment Alerts for specific criteria or opportunities of interest.
e. Streamlined Onboarding Process:
Simplify the onboarding experience for new investors through automated workflows and guided tutorials.
Ensure seamless integration with compliance and KYC processes to facilitate quick and secure account setup.
f. Enhanced Relationship Management:
Assign dedicated relationship managers to high-potential investors, leveraging Salesforce’s CRM capabilities to maintain personalized and proactive communication.
Track and analyze interaction history to anticipate investor needs and respond promptly.
5. Methods for Measuring Success
Key Performance Indicators (KPIs):
Investor Registrations: Track the number of new institutional and individual investors joining the platform.
Active Investments: Monitor the volume and value of active investments made through Hiive.
Transaction Volume: Measure the total value of secondary transactions facilitated on the platform.
Engagement Metrics: Assess open rates, click-through rates, and participation in events/webinars.
Customer Satisfaction: Gather feedback through surveys and Net Promoter Scores (NPS) to evaluate investor satisfaction and areas for improvement.
Analytics and Reporting:
Utilize Salesforce’s reporting tools to generate monthly and quarterly reports on initiative performance against KPIs.
Conduct A/B Testing on marketing campaigns to identify the most effective strategies and optimize future efforts.
Continuous Improvement:
Implement a feedback loop where insights from data analysis inform ongoing adjustments to the engagement strategies.
Regularly update investor personas and segmentation criteria based on evolving market trends and investor behaviors.
6. Expected Outcomes
Increased Investor Base: Significant growth in the number of institutional and accredited individual investors on Hiive’s platform.
Enhanced Investment Activity: Higher volumes of active investments and secondary transactions, driving platform liquidity and attractiveness.
Strengthened Investor Relationships: Improved investor retention and satisfaction through personalized engagement and support.
Optimized Salesforce Utilization: Effective use of Salesforce tools to manage and scale investor interactions, ensuring sustainable growth and operational efficiency.
Conclusion
The "Hiive Investor Acceleration Program" leverages Salesforce’s robust suite of tools to create a targeted, personalized, and efficient approach to engaging institutional and individual investors. By segmenting the user base, capturing essential information, understanding interrelationships, and executing a tailored engagement strategy, Hiive can significantly boost investor activity on its platform. Continuous monitoring and optimization based on Salesforce analytics will ensure the initiative remains effective and aligned with market dynamics, driving sustained growth and operational excellence.


You are the best private equity and venture capital secondary market expert in the world. Generate the best answer to "Q1: What user segments would you create out of Hiive’s customer groups?"


Q1: What User Segments Would You Create Out of Hiive’s Customer Groups?
To strategically implement Salesforce and enhance operational excellence at Hiive, it is essential to comprehensively segment Hiive’s primary customer groups—Issuers, Investors, and Sellers—into distinct user segments. This nuanced segmentation allows for tailored engagement, optimized service delivery, and maximized platform efficiency. Below is a detailed breakdown of the proposed user segments:

1. Issuers (Private Companies)
a. Early-Stage Startups

Characteristics:
Recently founded (typically within the first 2-5 years).
Limited revenue streams; primarily focused on product development and market entry.
High growth potential with scalable business models.
Needs:
Access to initial liquidity solutions to provide equity to employees and early investors.
Platforms that facilitate seamless secondary transactions without disrupting foundational equity structures.
Robust compliance and regulatory support to navigate early funding stages.
Engagement Strategies:
Offer educational resources on managing equity distributions.
Provide dedicated onboarding support to integrate their processes with Salesforce.
Implement automated workflows for equity transactions to reduce administrative burdens.
b. Growth-Stage Companies

Characteristics:
Established market presence with consistent revenue growth (typically 5-10 years old).
Expanding operations, entering new markets, or pursuing strategic acquisitions.
Intermediate to high valuation, often approaching pre-IPO stages.
Needs:
Enhanced liquidity solutions for a broader range of stakeholders, including late-stage investors and executives.
Detailed analytics and reporting on secondary transactions to inform strategic decisions.
Integration with Salesforce for streamlined investor relations and operational management.
Engagement Strategies:
Develop advanced Salesforce dashboards to monitor investment flows and stakeholder engagement.
Facilitate strategic workshops on optimizing equity structures for scalability.
Provide tailored support for complex secondary transaction scenarios.
c. Late-Stage Pre-IPO Companies

Characteristics:
Mature private companies preparing for public offerings.
Substantial revenue streams and refined business operations.
Significant investor base, including institutional backers and high-net-worth individuals.
Needs:
Sophisticated liquidity options to cater to a diverse investor and employee base.
Comprehensive compliance solutions to ensure readiness for IPO regulations.
Advanced reporting tools for performance tracking and investor transparency.
Engagement Strategies:
Implement Salesforce solutions for IPO readiness, including compliance tracking and reporting automation.
Offer premium support services for handling high-volume and high-value transactions.
Create dedicated channels for investor communications and updates.
2. Investors
a. Institutional Investors

Sub-Segments:
Venture Capital Firms: Focused on high-growth startups and innovative sectors.
Private Equity Firms: Interested in mature companies with stable cash flows and potential for operational improvements.
Family Offices: Managing wealth for high-net-worth families, seeking diversified investment opportunities.
Sovereign Wealth Funds: Large-scale investors representing national funds, looking for strategic investments with long-term horizons.
Characteristics:
Significant capital under management.
Expertise in evaluating and managing complex investments.
Long-term investment horizons with strategic objectives.
Needs:
Exclusive access to high-potential investment opportunities not available to public markets.
Comprehensive due diligence tools and in-depth reporting capabilities.
Seamless integration with Salesforce for portfolio management and performance tracking.
Engagement Strategies:
Develop tailored Salesforce dashboards showcasing exclusive investment opportunities and fund performance.
Facilitate direct communication channels with fund managers and issuers through Salesforce.
Provide automated reporting and analytics to support informed investment decisions.
b. Accredited Individual Investors

Characteristics:
High-net-worth individuals meeting SEC’s accredited investor criteria.
Diverse investment backgrounds, including angel investors, retirees, and successful entrepreneurs.
Seeking portfolio diversification and access to lucrative pre-IPO opportunities.
Needs:
User-friendly platform for managing private investments and tracking performance.
Transparent and detailed information on investment opportunities and historical performance.
Personalized investor support and relationship management.
Engagement Strategies:
Implement personalized onboarding experiences and educational resources within Salesforce.
Utilize targeted marketing campaigns to highlight investment opportunities matching individual preferences.
Offer personalized advisory services through Salesforce’s relationship management tools.
c. Corporate Investors

Characteristics:
Large corporations seeking strategic investments in startups and emerging technologies.
Aim to foster innovation, acquire new technologies, or gain market insights.
Often engaged in co-investment opportunities alongside traditional venture capital and private equity firms.
Needs:
Access to cutting-edge startups and technological innovations.
Platforms facilitating strategic alliances and co-investment opportunities.
Advanced analytics to assess investment impact on corporate strategy and growth.
Engagement Strategies:
Create dedicated Salesforce segments for corporate investors to access tailored investment opportunities.
Facilitate strategic partnership tools within Salesforce for co-investment management.
Provide comprehensive impact analytics and reporting for strategic investment evaluations.
3. Sellers
a. Employees and Founders Holding Equity

Characteristics:
Employees (including executives) and founders possessing equity through stock options, RSUs, or direct share ownership.
Motivated to seek liquidity for personal financial planning, diversification, or realizing gains.
Varied levels of financial literacy and investment experience.
Needs:
Secure and compliant mechanisms to sell shares without administrative hassles.
Clear communication and support throughout the selling process.
Integration with Salesforce to track and manage share transactions and portfolio holdings.
Engagement Strategies:
Implement user-friendly Salesforce interfaces for initiating and tracking share sales.
Provide educational resources and support via Salesforce’s knowledge base and support channels.
Automate transaction workflows to ensure compliance and efficiency.
b. Early-Stage Investors and Shareholders

Characteristics:
Initial backers of the company, including angel investors and seed fund participants.
Holding significant equity stakes with the objective of realizing returns through secondary sales or company exits.
Often engaged in active roles within the company’s strategic decisions.
Needs:
Efficient and transparent secondary market transactions to liquidate equity holdings.
Detailed reporting on share performance and investment outcomes.
Relationship management tools to maintain connections with issuers and other investors.
Engagement Strategies:
Utilize Salesforce to facilitate seamless secondary transactions and provide real-time performance reports.
Offer advanced analytics tools within Salesforce to evaluate investment performance and market trends.
Create networking opportunities through Salesforce-integrated events and forums.
c. Institutional Shareholders Seeking Liquidity

Characteristics:
Large institutional investors holding substantial equity stakes in private companies.
Require liquidity solutions to manage portfolio allocations and adjust investment strategies.
Often subject to internal liquidity requirements and investment mandates.
Needs:
High-capacity liquidity solutions to facilitate large-volume secondary transactions.
Comprehensive compliance and reporting features to meet institutional governance standards.
Strategic support and advisory services to optimize exit strategies.
Engagement Strategies:
Develop Salesforce solutions for managing bulk transactions and adhering to compliance protocols.
Provide dedicated support teams for institutional sellers through Salesforce’s customer service modules.
Implement strategic advisory tools within Salesforce for optimizing exit timing and pricing.
Relationships Among Customer Groups and User Segments
Understanding the intricate relationships among Issuers, Investors, and Sellers is pivotal for fostering a cohesive and dynamic ecosystem within Hiive’s platform. The interconnections facilitate seamless capital flows, strategic partnerships, and value creation across the marketplace.

Issuers ↔ Investors
Investment Flow:
Issuers seek capital injections to fuel growth, operational expansions, or strategic exits.
Investors provide the necessary funds in exchange for equity stakes, aiming for returns through company growth and eventual exit events (IPO, acquisition).
Ongoing Engagement:
Issuers maintain robust relationships with Investors to secure repeated funding, strategic guidance, and operational support.
Investors engage with Issuers to monitor performance, participate in governance, and influence strategic directions to enhance investment returns.
Issuers ↔ Sellers
Equity Management and Liquidity:
Sellers hold equity stakes in Issuers and may seek liquidity through secondary sales facilitated by Hiive.
Issuers provide the infrastructure and compliance frameworks necessary for Sellers to liquidate their holdings without disrupting the company’s equity structure.
Compliance and Oversight:
Issuers ensure that all secondary transactions adhere to regulatory requirements and internal policies, maintaining control over who can acquire additional shares.
Sellers rely on Issuers for transparent processes and support during the liquidity events.
Investors ↔ Sellers
Secondary Market Transactions:
Investors participate in the secondary market by purchasing shares from Sellers, thereby diversifying their portfolios and accessing exclusive investment opportunities.
Sellers provide liquidity by offering their shares to Investors, enabling them to realize returns on their equity holdings.
Data and Analytics:
Investors utilize data from secondary transactions to inform investment strategies, assess market trends
, and identify emerging opportunities.
- Sellers leverage insights from Investors to make informed decisions about optimal timing and pricing for their sell-offs, maximizing their financial gains.

Overall Ecosystem Dynamics
Value Creation and Growth:
Issuers benefit from the infusion of capital provided by Investors, enabling them to scale operations, innovate, and enhance market positioning.
Investors gain from the appreciation of their equity stakes in Issuers, alongside the liquidity provided by Sellers, ensuring a healthy cycle of investment and return.
Sellers realize financial gains through the sale of their equity, which incentivizes continued participation and investment within the Hiive ecosystem.
Feedback Loops and Network Effects:
Successful transactions between Investors and Sellers increase platform credibility and attractiveness, drawing more Issuers and Investors to Hiive.
Enhanced liquidity and diverse investment opportunities create a virtuous cycle, fostering sustained growth and a robust marketplace.
Data-driven insights from Salesforce analytics inform strategic improvements, ensuring that Hiive continually meets the evolving needs of all user segments.
Conclusion
By meticulously segmenting Hiive’s customer base into targeted user groups—Early-Stage Startups, Growth-Stage Companies, Late-Stage Pre-IPO Companies, Institutional Investors, Accredited Individual Investors, Corporate Investors, Employees and Founders Holding Equity, Early-Stage Investors, and Institutional Shareholders Seeking Liquidity—Hiive can tailor its Salesforce implementation to address the unique needs and behaviors of each segment. This strategic segmentation not only enhances personalized engagement and service delivery but also fosters a synergistic ecosystem where capital flows efficiently, and value is maximized across the platform. Leveraging these insights, Hiive can optimize user experiences, drive increased platform adoption, and maintain its position as a leading marketplace in the venture-backed pre-IPO secondary market.


Focus purely on giving the best answer to the question "Q1: What user segments would you create out of Hiive’s customer groups?"


Q1: What User Segments Would You Create Out of Hiive’s Customer Groups?
To effectively serve Hiive’s diverse clientele and optimize platform operations, it’s essential to segment Hiive’s primary customer groups—Issuers, Investors, and Sellers—into distinct, actionable segments. This segmentation facilitates tailored engagement, personalized service delivery, and enhanced platform functionality. Below are the proposed user segments with detailed characteristics and needs:

1. Issuers (Private Companies)
a. Early-Stage Startups

Characteristics:
Recently founded (typically within the first 2-5 years).
High-growth potential with innovative products or services.
Limited revenue streams; focused on scaling and market penetration.
Needs:
Efficient equity management and secondary transaction facilitation.
Access to a network of accredited investors and venture capitalists.
Compliance and regulatory support for secondary sales.
Tools for managing employee equity and incentivizing talent.
b. Growth-Stage Companies

Characteristics:
Established market presence with consistent revenue growth (typically 5-10 years old).
Expanding operations, entering new markets, or pursuing strategic acquisitions.
Intermediate to high valuation, often approaching pre-IPO stages.
Needs:
Advanced liquidity solutions for a broader range of stakeholders.
Detailed analytics and reporting on secondary transactions.
Integration with Salesforce for streamlined investor relations and operational management.
Strategic advisory services for optimizing cap tables and equity structures.
c. Pre-IPO Companies

Characteristics:
Mature private companies preparing for public offerings.
Significant institutional investor interest.
Maintaining control while offering liquidity options to select shareholders.
Needs:
Sophisticated compliance and regulatory tools to prepare for IPO requirements.
High-end analytics for tracking investments and performance.
Secure and efficient transaction processes for large-scale secondary sales.
Enhanced reporting and transparency for investor relations.
2. Investors
a. Institutional Investors

Sub-Segments:
Venture Capital Firms: Focused on high-risk, high-reward early-stage investments.
Private Equity Firms: Interested in later-stage, lower-risk investments with stable returns.
Family Offices: Managing wealth for high-net-worth families, seeking diversified investment opportunities.
Sovereign Wealth Funds: National funds seeking strategic and long-term investments.
Characteristics:
Large capital under management.
Expertise in evaluating and managing complex investments.
Long-term investment horizons with strategic objectives.
Needs:
Exclusive access to high-potential investment opportunities.
Comprehensive due diligence and investment tracking tools.
Integration with portfolio management systems and Salesforce.
Advanced reporting and analytics for performance monitoring.
b. Accredited Individual Investors

Characteristics:
High-net-worth individuals meeting SEC accreditation criteria.
Diverse backgrounds, including entrepreneurs, retirees, and successful professionals.
Seeking portfolio diversification and access to lucrative pre-IPO opportunities.
Needs:
User-friendly platform for managing private investments and tracking performance.
Transparent and detailed information on investment opportunities.
Personalized support and relationship management.
Tools for assessing investment risks and returns.
c. Corporate Investors

Characteristics:
Large corporations investing for strategic growth or technology acquisition.
Looking for innovative startups or high-potential private companies.
Engaged in co-investment opportunities alongside traditional venture capital and private equity firms.
Needs:
Access to cutting-edge startups and technological innovations.
Platforms facilitating strategic alliances and co-investment opportunities.
Advanced analytics to assess investment impact on corporate strategy and growth.
Integration with corporate investment strategies and Salesforce.
3. Sellers
a. Employees and Founders Holding Equity

Characteristics:
Employees (including executives) and founders with equity stakes through stock options, RSUs, or direct share ownership.
Motivated to seek liquidity for personal financial planning, diversification, or realizing gains.
Varied levels of financial literacy and investment experience.
Needs:
Secure and compliant mechanisms for selling shares.
Clear, transparent processes and support throughout the selling journey.
Tools for managing and tracking share transactions and portfolio holdings.
Integration with personal financial management systems.
b. Early-Stage Investors and Shareholders

Characteristics:
Initial backers of companies, including angel investors and seed fund participants.
Holding significant equity stakes seeking liquidity or portfolio rebalancing.
Often engaged in active roles within the company’s strategic decisions.
Needs:
Efficient secondary transaction platforms for liquidity.
Detailed reporting on share performance and investment outcomes.
Relationship management tools to maintain connections with issuers and other investors.
Analytics for assessing investment performance and market trends.
c. Institutional Shareholders Seeking Liquidity

Characteristics:
Large institutional investors holding substantial equity stakes in private companies.
Require liquidity solutions for portfolio management and allocation adjustments.
Often subject to internal liquidity requirements and investment mandates.
Needs:
High-capacity liquidity solutions for large-volume secondary transactions.
Comprehensive compliance and reporting features to meet institutional governance standards.
Strategic support and advisory services to optimize exit strategies.
Integration with institutional portfolio management systems and Salesforce.
Conclusion
By segmenting Hiive’s customer groups into these distinct user segments—Early-Stage Startups, Growth-Stage Companies, Pre-IPO Companies, Institutional Investors, Accredited Individual Investors, Corporate Investors, Employees and Founders Holding Equity, Early-Stage Investors and Shareholders, and Institutional Shareholders Seeking Liquidity—Hiive can deliver highly personalized and efficient services. This segmentation not only enhances user experience but also drives platform growth and operational excellence, positioning Hiive as a leading marketplace in the venture-backed pre-IPO secondary market.


You are the best private equity and venture capital secondary market and CRM expert in the world. Generate the best answer to "What essential fields and critical information would you capture in a CRM system for each user segment you've identified?"

The answer to "What essential fields and critical information would you capture in a CRM system for each user segment you've identified?" should align with the answer to question "What User Segments Would You Create Out of Hiive’s Customer Groups?"

I would create detailed breakdown of the proposed user segments:

Issuers (Private Companies)
a. Early-Stage Startups
o Characteristics:
o Recently founded (typically within the first 2-5 years).
o Limited revenue streams; primarily focused on product development and market entry.
o High growth potential with scalable business models.
o Needs:
o Access to initial liquidity solutions to provide equity to employees and early investors.
o Platforms that facilitate seamless secondary transactions without disrupting foundational equity structures.
o Robust compliance and regulatory support to navigate early funding stages.
o Engagement Strategies:
o Offer educational resources on managing equity distributions.
o Provide dedicated onboarding support to integrate their processes with Salesforce.
o Implement automated workflows for equity transactions to reduce administrative burdens.
b. Growth-Stage Companies
o Characteristics:
o Established market presence with consistent revenue growth (typically 5-10 years old).
o Expanding operations, entering new markets, or pursuing strategic acquisitions.
o Intermediate to high valuation, often approaching pre-IPO stages.
o Needs:
o Enhanced liquidity solutions for a broader range of stakeholders, including late-stage investors and executives.
o Detailed analytics and reporting on secondary transactions to inform strategic decisions.
o Integration with Salesforce for streamlined investor relations and operational management.
o Engagement Strategies:
o Develop advanced Salesforce dashboards to monitor investment flows and stakeholder engagement.
o Facilitate strategic workshops on optimizing equity structures for scalability.
o Provide tailored support for complex secondary transaction scenarios.
c. Late-Stage Pre-IPO Companies
o Characteristics:
o Mature private companies preparing for public offerings.
o Substantial revenue streams and refined business operations.
o Significant investor base, including institutional backers and high-net-worth individuals.
o Needs:
o Sophisticated liquidity options to cater to a diverse investor and employee base.
o Comprehensive compliance solutions to ensure readiness for IPO regulations.
o Advanced reporting tools for performance tracking and investor transparency.
o Engagement Strategies:
o Implement Salesforce solutions for IPO readiness, including compliance tracking and reporting automation.
o Offer premium support services for handling high-volume and high-value transactions.
o Create dedicated channels for investor communications and updates.

Investors
a. Institutional Investors
o Sub-Segments:
o Venture Capital Firms: Focused on high-growth startups and innovative sectors.
o Private Equity Firms: Interested in mature companies with stable cash flows and potential for operational improvements.
o Family Offices: Managing wealth for high-net-worth families, seeking diversified investment opportunities.
o Sovereign Wealth Funds: Large-scale investors representing national funds, looking for strategic investments with long-term horizons.
o Characteristics:
o Significant capital under management.
o Expertise in evaluating and managing complex investments.
o Long-term investment horizons with strategic objectives.
o Needs:
o Exclusive access to high-potential investment opportunities not available to public markets.
o Comprehensive due diligence tools and in-depth reporting capabilities.
o Seamless integration with Salesforce for portfolio management and performance tracking.
o Engagement Strategies:
o Develop tailored Salesforce dashboards showcasing exclusive investment opportunities and fund performance.
o Facilitate direct communication channels with fund managers and issuers through Salesforce.
o Provide automated reporting and analytics to support informed investment decisions.
b. Accredited Individual Investors
o Characteristics:
o High-net-worth individuals meeting SEC’s accredited investor criteria.
o Diverse investment backgrounds, including angel investors, retirees, and successful entrepreneurs.
o Seeking portfolio diversification and access to lucrative pre-IPO opportunities.
o Needs:
o User-friendly platform for managing private investments and tracking performance.
o Transparent and detailed information on investment opportunities and historical performance.
o Personalized investor support and relationship management.
o Engagement Strategies:
o Implement personalized onboarding experiences and educational resources within Salesforce.
o Utilize targeted marketing campaigns to highlight investment opportunities matching individual preferences.
o Offer personalized advisory services through Salesforce’s relationship management tools.
c. Corporate Investors
o Characteristics:
o Large corporations seeking strategic investments in startups and emerging technologies.
o Aim to foster innovation, acquire new technologies, or gain market insights.
o Often engaged in co-investment opportunities alongside traditional venture capital and private equity firms.
o Needs:
o Access to cutting-edge startups and technological innovations.
o Platforms facilitating strategic alliances and co-investment opportunities.
o Advanced analytics to assess investment impact on corporate strategy and growth.
o Engagement Strategies:
o Create dedicated Salesforce segments for corporate investors to access tailored investment opportunities.
o Facilitate strategic partnership tools within Salesforce for co-investment management.
o Provide comprehensive impact analytics and reporting for strategic investment evaluations.

Sellers
a. Employees and Founders Holding Equity
o Characteristics:
o Employees (including executives) and founders possessing equity through stock options, RSUs, or direct share ownership.
o Motivated to seek liquidity for personal financial planning, diversification, or realizing gains.
o Varied levels of financial literacy and investment experience.
o Needs:
o Secure and compliant mechanisms to sell shares without administrative hassles.
o Clear communication and support throughout the selling process.
o Integration with Salesforce to track and manage share transactions and portfolio holdings.
o Engagement Strategies:
o Implement user-friendly Salesforce interfaces for initiating and tracking share sales.
o Provide educational resources and support via Salesforce’s knowledge base and support channels.
o Automate transaction workflows to ensure compliance and efficiency.
b. Early-Stage Investors and Shareholders
o Characteristics:
o Initial backers of the company, including angel investors and seed fund participants.
o Holding significant equity stakes with the objective of realizing returns through secondary sales or company exits.
o Often engaged in active roles within the company’s strategic decisions.
o Needs:
o Efficient and transparent secondary market transactions to liquidate equity holdings.
o Detailed reporting on share performance and investment outcomes.
o Relationship management tools to maintain connections with issuers and other investors.
o Engagement Strategies:
o Utilize Salesforce to facilitate seamless secondary transactions and provide real-time performance reports.
o Offer advanced analytics tools within Salesforce to evaluate investment performance and market trends.
o Create networking opportunities through Salesforce-integrated events and forums.
c. Institutional Shareholders Seeking Liquidity
o Characteristics:
o Large institutional investors holding substantial equity stakes in private companies.
o Require liquidity solutions to manage portfolio allocations and adjust investment strategies.
o Often subject to internal liquidity requirements and investment mandates.
o Needs:
o High-capacity liquidity solutions to facilitate large-volume secondary transactions.
o Comprehensive compliance and reporting features to meet institutional governance standards.
o Strategic support and advisory services to optimize exit strategies.
o Engagement Strategies:
o Develop Salesforce solutions for managing bulk transactions and adhering to compliance protocols.
o Provide dedicated support teams for institutional sellers through Salesforce’s customer service modules.
o Implement strategic advisory tools within Salesforce for optimizing exit timing and pricing.


Q2: What Essential Fields and Critical Information Would You Capture in a CRM System for Each User Segment You've Identified?
To optimize Hiive’s CRM implementation using Salesforce, it is imperative to capture tailored fields and critical information for each identified user segment. This ensures personalized engagement, streamlined operations, and enhanced data-driven decision-making. Below is a comprehensive breakdown of essential CRM fields for each user segment based on the previously defined categories:

1. Issuers (Private Companies)
a. Early-Stage Startups
Core Information:
Company Name
Industry/Sector
Date Founded
Location (Headquarters and Additional Offices)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., Founder, CEO)
Email Address
Phone Number
LinkedIn Profile
Operational Metrics:
Number of Employees
Annual Revenue (Current and Projected)
Funding History: Previous funding rounds, amounts raised, lead investors
Equity Structure: Total equity available for secondary sales, existing shareholders
Investment Specifics:
Current Valuation
Funding Needs: Specific amounts sought through secondary transactions
Use of Funds: Detailed allocation of raised capital (e.g., product development, marketing)
Compliance and Regulatory Information:
SEC Filings (if any)
Compliance Certifications
Legal Restrictions on Equity Sales
Engagement Metrics:
Interaction History: Meetings, communications, inquiries logged
Pipeline Stage: Lead, Opportunity, Negotiation, Closed-Won/Lost
Custom Fields:
Growth Projections: Short-term and long-term growth targets
Key Milestones: Achieved and upcoming milestones
b. Growth-Stage Companies
Core Information:
Company Name
Industry/Sector
Years in Operation
Location (Headquarters and Additional Offices)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., CFO, COO)
Email Address
Phone Number
LinkedIn Profile
Operational Metrics:
Number of Employees
Annual Revenue (Current and Projected)
Funding History: Detailed history of funding rounds, amounts, lead investors
Valuation Metrics: Current valuation, EBITDA, growth rates
Investment Specifics:
Equity Available for Secondary Sales
Investment Preferences: Types of investors sought, strategic goals for secondary transactions
Target Acquisitions: Planned acquisitions and funding requirements
Compliance and Regulatory Information:
SEC Filings (if any)
Compliance Certifications
Legal Restrictions on Equity Sales
Engagement Metrics:
Interaction History: Detailed logs of all interactions with investors
Pipeline Stage: Active opportunities, negotiations underway
Custom Fields:
Operational Improvements: Planned initiatives to enhance performance
Strategic Goals: Short-term and long-term strategic objectives
c. Pre-IPO Companies
Core Information:
Company Name
Industry/Sector
Years in Operation
Location (Headquarters and Additional Offices)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., CEO, CFO)
Email Address
Phone Number
LinkedIn Profile
Operational Metrics:
Number of Employees
Annual Revenue (Current and Projected)
Funding History: Comprehensive details of all funding rounds, amounts, lead investors
Valuation Metrics: Current pre-IPO valuation, EBITDA, growth rates
Investment Specifics:
Equity Available for Secondary Sales
IPO Readiness Status: Compliance status, regulatory preparations
Investment Preferences: Types of investors sought, strategic alignment for secondary transactions
Compliance and Regulatory Information:
SEC Filings (if any)
IPO Documentation: Prospectus drafts, compliance checklists
Legal Restrictions on Equity Sales
Engagement Metrics:
Interaction History: Detailed logs of all high-level interactions with institutional investors
Pipeline Stage: Advanced stages of investment opportunities, final negotiations
Custom Fields:
IPO Timeline: Expected dates and milestones leading up to the IPO
Investor Commitments: Details of committed investors leading up to IPO
2. Investors
a. Institutional Investors
Sub-Segments: Venture Capital Firms, Private Equity Firms, Family Offices, Sovereign Wealth Funds

Core Information:
Firm Name
Sub-Segment Type: Venture Capital, Private Equity, Family Office, Sovereign Wealth Fund
Location(s)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., Managing Partner, Investment Director)
Email Address
Phone Number
LinkedIn Profile
Investment Metrics:
Capital Under Management
Fund Details: Fund names, sizes, vintage years, committed capital
Investment Focus: Preferred industries, stages, geographies
Portfolio Information: Current investments, fund performance metrics
Engagement Metrics:
Interaction History: Meetings, communications, investment proposals reviewed
Pipeline Stage: Active opportunities, due diligence, negotiations
Engagement Score: Level of engagement based on interactions and interests
Custom Fields:
Strategic Objectives: Long-term goals for investments
Preferred Investment Structures: Equity, debt, convertible notes
Essential CRM Fields:

Field Category	Essential Fields	Description
Core Information	Firm Name, Sub-Segment Type, Location, Website URL	Basic identification and categorization of the firm
Contact Details	Primary Contact Name, Title, Email, Phone, LinkedIn Profile	Key individuals for communication and relationship management
Investment Metrics	Capital Under Management, Fund Details, Investment Focus, Portfolio Information	Detailed financial and strategic information on investment capabilities and interests
Engagement Metrics	Interaction History, Pipeline Stage, Engagement Score	Tracking communication and investment opportunity status
Custom Fields	Strategic Objectives, Preferred Investment Structures	Specific goals and preferences to tailor investment offers
b. Accredited Individual Investors
Core Information:
Investor Name
Accreditation Status: Verified accreditation (Yes/No)
Location
Contact Information: Email, Phone Number, LinkedIn Profile
Investment Metrics:
Net Worth
Annual Income
Investment Preferences: Preferred industries, stages, investment sizes
Current Portfolio Holdings: Existing private and public investments
Engagement Metrics:
Interaction History: Communications, webinars attended, proposals reviewed
Pipeline Stage: Interested, actively considering, committed
Engagement Score: Based on interaction frequency and depth
Custom Fields:
Risk Tolerance: High, medium, low
Investment Goals: Income generation, capital appreciation, diversification
Essential CRM Fields:

Field Category	Essential Fields	Description
Core Information	Investor Name, Accreditation Status, Location, Contact Info	Basic identification and verification of investor qualifications
Investment Metrics	Net Worth, Annual Income, Investment Preferences, Portfolio Holdings	Financial capacity and specific investment interests
Engagement Metrics	Interaction History, Pipeline Stage, Engagement Score	Tracking communication and investment consideration status
Custom Fields	Risk Tolerance, Investment Goals	Personal investment preferences and risk profiles
c. Corporate Investors
Core Information:
Corporation Name
Industry/Sector
Location(s)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., Corporate Development Manager, Head of Innovation)
Email Address
Phone Number
LinkedIn Profile
Investment Metrics:
Investment Focus: Strategic sectors, technologies, co-investment preferences
Capital Allocation: Budget for private market investments
Portfolio Information: Current private and public investments, strategic alignments
Engagement Metrics:
Interaction History: Strategic meetings, partnership discussions
Pipeline Stage: Identifying opportunities, active negotiations, committed deals
Engagement Score: Based on interaction depth and strategic alignment
Custom Fields:
Strategic Goals: Innovation, technology acquisition, market expansion
Preferred Investment Structures: Co-investments, majority/minority stakes
Essential CRM Fields:

Field Category	Essential Fields	Description
Core Information	Corporation Name, Industry/Sector, Location, Website URL	Basic identification and categor

You are the best private equity and venture capital secondary market and CRM expert in the world. Generate the best answer to "What essential fields and critical information would you capture in a CRM system for each user segment you've identified?" Also only bold anything whenever necessary.

The answer to "What essential fields and critical information would you capture in a CRM system for each user segment you've identified?" should align with the answer to question "What User Segments Would You Create Out of Hiive’s Customer Groups?"

I would create detailed breakdown of the proposed user segments:

Issuers (Private Companies)
a. Early-Stage Startups
o Characteristics:
o Recently founded (typically within the first 2-5 years).
o Limited revenue streams; primarily focused on product development and market entry.
o High growth potential with scalable business models.
o Needs:
o Access to initial liquidity solutions to provide equity to employees and early investors.
o Platforms that facilitate seamless secondary transactions without disrupting foundational equity structures.
o Robust compliance and regulatory support to navigate early funding stages.
o Engagement Strategies:
o Offer educational resources on managing equity distributions.
o Provide dedicated onboarding support to integrate their processes with Salesforce.
o Implement automated workflows for equity transactions to reduce administrative burdens.
b. Growth-Stage Companies
o Characteristics:
o Established market presence with consistent revenue growth (typically 5-10 years old).
o Expanding operations, entering new markets, or pursuing strategic acquisitions.
o Intermediate to high valuation, often approaching pre-IPO stages.
o Needs:
o Enhanced liquidity solutions for a broader range of stakeholders, including late-stage investors and executives.
o Detailed analytics and reporting on secondary transactions to inform strategic decisions.
o Integration with Salesforce for streamlined investor relations and operational management.
o Engagement Strategies:
o Develop advanced Salesforce dashboards to monitor investment flows and stakeholder engagement.
o Facilitate strategic workshops on optimizing equity structures for scalability.
o Provide tailored support for complex secondary transaction scenarios.
c. Late-Stage Pre-IPO Companies
o Characteristics:
o Mature private companies preparing for public offerings.
o Substantial revenue streams and refined business operations.
o Significant investor base, including institutional backers and high-net-worth individuals.
o Needs:
o Sophisticated liquidity options to cater to a diverse investor and employee base.
o Comprehensive compliance solutions to ensure readiness for IPO regulations.
o Advanced reporting tools for performance tracking and investor transparency.
o Engagement Strategies:
o Implement Salesforce solutions for IPO readiness, including compliance tracking and reporting automation.
o Offer premium support services for handling high-volume and high-value transactions.
o Create dedicated channels for investor communications and updates.

Investors
a. Institutional Investors
o Sub-Segments:
o Venture Capital Firms: Focused on high-growth startups and innovative sectors.
o Private Equity Firms: Interested in mature companies with stable cash flows and potential for operational improvements.
o Family Offices: Managing wealth for high-net-worth families, seeking diversified investment opportunities.
o Sovereign Wealth Funds: Large-scale investors representing national funds, looking for strategic investments with long-term horizons.
o Characteristics:
o Significant capital under management.
o Expertise in evaluating and managing complex investments.
o Long-term investment horizons with strategic objectives.
o Needs:
o Exclusive access to high-potential investment opportunities not available to public markets.
o Comprehensive due diligence tools and in-depth reporting capabilities.
o Seamless integration with Salesforce for portfolio management and performance tracking.
o Engagement Strategies:
o Develop tailored Salesforce dashboards showcasing exclusive investment opportunities and fund performance.
o Facilitate direct communication channels with fund managers and issuers through Salesforce.
o Provide automated reporting and analytics to support informed investment decisions.
b. Accredited Individual Investors
o Characteristics:
o High-net-worth individuals meeting SEC’s accredited investor criteria.
o Diverse investment backgrounds, including angel investors, retirees, and successful entrepreneurs.
o Seeking portfolio diversification and access to lucrative pre-IPO opportunities.
o Needs:
o User-friendly platform for managing private investments and tracking performance.
o Transparent and detailed information on investment opportunities and historical performance.
o Personalized investor support and relationship management.
o Engagement Strategies:
o Implement personalized onboarding experiences and educational resources within Salesforce.
o Utilize targeted marketing campaigns to highlight investment opportunities matching individual preferences.
o Offer personalized advisory services through Salesforce’s relationship management tools.
c. Corporate Investors
o Characteristics:
o Large corporations seeking strategic investments in startups and emerging technologies.
o Aim to foster innovation, acquire new technologies, or gain market insights.
o Often engaged in co-investment opportunities alongside traditional venture capital and private equity firms.
o Needs:
o Access to cutting-edge startups and technological innovations.
o Platforms facilitating strategic alliances and co-investment opportunities.
o Advanced analytics to assess investment impact on corporate strategy and growth.
o Engagement Strategies:
o Create dedicated Salesforce segments for corporate investors to access tailored investment opportunities.
o Facilitate strategic partnership tools within Salesforce for co-investment management.
o Provide comprehensive impact analytics and reporting for strategic investment evaluations.

Sellers
a. Employees and Founders Holding Equity
o Characteristics:
o Employees (including executives) and founders possessing equity through stock options, RSUs, or direct share ownership.
o Motivated to seek liquidity for personal financial planning, diversification, or realizing gains.
o Varied levels of financial literacy and investment experience.
o Needs:
o Secure and compliant mechanisms to sell shares without administrative hassles.
o Clear communication and support throughout the selling process.
o Integration with Salesforce to track and manage share transactions and portfolio holdings.
o Engagement Strategies:
o Implement user-friendly Salesforce interfaces for initiating and tracking share sales.
o Provide educational resources and support via Salesforce’s knowledge base and support channels.
o Automate transaction workflows to ensure compliance and efficiency.
b. Early-Stage Investors and Shareholders
o Characteristics:
o Initial backers of the company, including angel investors and seed fund participants.
o Holding significant equity stakes with the objective of realizing returns through secondary sales or company exits.
o Often engaged in active roles within the company’s strategic decisions.
o Needs:
o Efficient and transparent secondary market transactions to liquidate equity holdings.
o Detailed reporting on share performance and investment outcomes.
o Relationship management tools to maintain connections with issuers and other investors.
o Engagement Strategies:
o Utilize Salesforce to facilitate seamless secondary transactions and provide real-time performance reports.
o Offer advanced analytics tools within Salesforce to evaluate investment performance and market trends.
o Create networking opportunities through Salesforce-integrated events and forums.
c. Institutional Shareholders Seeking Liquidity
o Characteristics:
o Large institutional investors holding substantial equity stakes in private companies.
o Require liquidity solutions to manage portfolio allocations and adjust investment strategies.
o Often subject to internal liquidity requirements and investment mandates.
o Needs:
o High-capacity liquidity solutions to facilitate large-volume secondary transactions.
o Comprehensive compliance and reporting features to meet institutional governance standards.
o Strategic support and advisory services to optimize exit strategies.
o Engagement Strategies:
o Develop Salesforce solutions for managing bulk transactions and adhering to compliance protocols.
o Provide dedicated support teams for institutional sellers through Salesforce’s customer service modules.
o Implement strategic advisory tools within Salesforce for optimizing exit timing and pricing.


Q2: What Essential Fields and Critical Information Would You Capture in a CRM System for Each User Segment You've Identified?
To maximize the effectiveness of Hiive’s CRM implementation using Salesforce, it is crucial to capture tailored fields and critical information for each identified user segment. This ensures personalized engagement, streamlined operations, and enhanced data-driven decision-making. Below is a comprehensive breakdown of essential CRM fields for each user segment based on the previously defined categories:

1. Issuers (Private Companies)
a. Early-Stage Startups
Core Information:
Company Name
Industry/Sector
Date Founded
Location (Headquarters and Additional Offices)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., Founder, CEO)
Email Address
Phone Number
LinkedIn Profile
Operational Metrics:
Number of Employees
Annual Revenue (Current and Projected)
Funding History: Previous funding rounds, amounts raised, lead investors
Equity Structure: Total equity available for secondary sales, existing shareholders
Investment Specifics:
Current Valuation
Funding Needs: Specific amounts sought through secondary transactions
Use of Funds: Detailed allocation of raised capital (e.g., product development, marketing)
Compliance and Regulatory Information:
SEC Filings (if any)
Compliance Certifications
Legal Restrictions on Equity Sales
Engagement Metrics:
Interaction History: Meetings, communications, inquiries logged
Pipeline Stage: Lead, Opportunity, Negotiation, Closed-Won/Lost
Custom Fields:
Growth Projections: Short-term and long-term growth targets
Key Milestones: Achieved and upcoming milestones
b. Growth-Stage Companies
Core Information:
Company Name
Industry/Sector
Years in Operation
Location (Headquarters and Additional Offices)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., CFO, COO)
Email Address
Phone Number
LinkedIn Profile
Operational Metrics:
Number of Employees
Annual Revenue (Current and Projected)
Funding History: Detailed history of funding rounds, amounts, lead investors
Valuation Metrics: Current valuation, EBITDA, growth rates
Investment Specifics:
Equity Available for Secondary Sales
Investment Preferences: Types of investors sought, strategic goals for secondary transactions
Target Acquisitions: Planned acquisitions and funding requirements
Compliance and Regulatory Information:
SEC Filings (if any)
Compliance Certifications
Legal Restrictions on Equity Sales
Engagement Metrics:
Interaction History: Detailed logs of all interactions with investors
Pipeline Stage: Active opportunities, negotiations underway
Custom Fields:
Operational Improvements: Planned initiatives to enhance performance
Strategic Goals: Short-term and long-term strategic objectives
c. Late-Stage Pre-IPO Companies
Core Information:
Company Name
Industry/Sector
Years in Operation
Location (Headquarters and Additional Offices)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., CEO, CFO)
Email Address
Phone Number
LinkedIn Profile
Operational Metrics:
Number of Employees
Annual Revenue (Current and Projected)
Funding History: Comprehensive details of all funding rounds, amounts, lead investors
Valuation Metrics: Current pre-IPO valuation, EBITDA, growth rates
Investment Specifics:
Equity Available for Secondary Sales
IPO Readiness Status: Compliance status, regulatory preparations
Investment Preferences: Types of investors sought, strategic alignment for secondary transactions
Compliance and Regulatory Information:
SEC Filings (if any)
IPO Documentation: Prospectus drafts, compliance checklists
Legal Restrictions on Equity Sales
Engagement Metrics:
Interaction History: Detailed logs of all high-level interactions with institutional investors
Pipeline Stage: Advanced stages of investment opportunities, final negotiations
Custom Fields:
IPO Timeline: Expected dates and milestones leading up to the IPO
Investor Commitments: Details of committed investors leading up to IPO
2. Investors
a. Institutional Investors
Sub-Segments: Venture Capital Firms, Private Equity Firms, Family Offices, Sovereign Wealth Funds

Core Information:
Firm Name
Sub-Segment Type: Venture Capital, Private Equity, Family Office, Sovereign Wealth Fund
Location(s)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., Managing Partner, Investment Director)
Email Address
Phone Number
LinkedIn Profile
Investment Metrics:
Capital Under Management
Fund Details: Fund names, sizes, vintage years, committed capital
Investment Focus: Preferred industries, stages, geographies
Portfolio Information: Current investments, fund performance metrics
Engagement Metrics:
Interaction History: Meetings, communications, investment proposals reviewed
Pipeline Stage: Active opportunities, due diligence, negotiations
Engagement Score: Level of engagement based on interactions and interests
Custom Fields:
Strategic Objectives: Long-term goals for investments
Preferred Investment Structures: Equity, debt, convertible notes
Essential CRM Fields:
Field Category	Essential Fields	Description
Core Information	Firm Name, Sub-Segment Type, Location, Website URL	Basic identification and categorization of the firm
Contact Details	Primary Contact Name, Title, Email, Phone, LinkedIn Profile	Key individuals for communication and relationship management
Investment Metrics	Capital Under Management, Fund Details, Investment Focus, Portfolio Information	Detailed financial and strategic information on investment capabilities and interests
Engagement Metrics	Interaction History, Pipeline Stage, Engagement Score	Tracking communication and investment opportunity status
Custom Fields	Strategic Objectives, Preferred Investment Structures	Specific goals and preferences to tailor investment offers
b. Accredited Individual Investors
Core Information:
Investor Name
Accreditation Status: Verified accreditation (Yes/No)
Location
Contact Information: Email, Phone Number, LinkedIn Profile
Investment Metrics:
Net Worth
Annual Income
Investment Preferences: Preferred industries, stages, investment sizes
Current Portfolio Holdings: Existing private and public investments
Engagement Metrics:
Interaction History: Communications, webinars attended, proposals reviewed
Pipeline Stage: Interested, actively considering, committed
Engagement Score: Based on interaction frequency and depth
Custom Fields:
Risk Tolerance: High, medium, low
Investment Goals: Income generation, capital appreciation, diversification
Essential CRM Fields:
Field Category	Essential Fields	Description
Core Information	Investor Name, Accreditation Status, Location, Contact Info	Basic identification and verification of investor qualifications
Investment Metrics	Net Worth, Annual Income, Investment Preferences, Portfolio Holdings	Financial capacity and specific investment interests
Engagement Metrics	Interaction History, Pipeline Stage, Engagement Score	Tracking communication and investment consideration status
Custom Fields	Risk Tolerance, Investment Goals	Personal investment preferences and risk profiles
c. Corporate Investors
Core Information:
Corporation Name
Industry/Sector
Location(s)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., Corporate Development Manager, Head of Innovation)
Email Address
Phone Number
LinkedIn Profile
Investment Metrics:
Investment Focus: Strategic sectors, technologies, co-investment preferences
Capital Allocation: Budget for private market investments
Portfolio Information: Current private and public investments, strategic alignments
Engagement Metrics:
Interaction History: Strategic meetings, partnership discussions
Pipeline Stage: Identifying opportunities, active negotiations, committed deals
Engagement Score: Based on interaction depth and strategic alignment
Custom Fields:
Strategic Goals: Innovation, technology acquisition, market expansion
Preferred Investment Structures: Co-investments, majority/minority stakes
Essential CRM Fields:
Field Category	Essential Fields	Description
Core Information	Corporation Name, Industry/Sector, Location, Website URL	Basic identification and categorization of the corporation
Contact Details	Primary Contact Name, Title, Email, Phone, LinkedIn Profile	Key individuals for communication and relationship management
Investment Metrics	Investment Focus, Capital Allocation, Portfolio Information	Detailed information on investment strategies and current holdings
Engagement Metrics	Interaction History, Pipeline Stage, Engagement Score	Tracking communication and investment opportunity status
Custom Fields	Strategic Goals, Preferred Investment Structures	Specific strategic objectives and investment preferences
3. Sellers
a. Employees and Founders Holding Equity
Core Information:
Seller Name
Role in Company: Employee, Founder, Executive
Equity Details: Type of equity (RSUs, Stock Options, Direct Shares), Number of Shares
Contact Details:
Email Address
Phone Number
LinkedIn Profile
Equity Management:
Vesting Schedule: Vesting dates, cliff periods
Current Equity Value: Estimated market value based on latest valuation
Selling Preferences: Desired sale amounts, timing, conditions
Compliance and Regulatory Information:
KYC Compliance Status
Legal Restrictions on Share Sales
Transaction History:
Past Sales: Dates, volumes, realized gains/losses
Current Open Transactions: Status, amounts
Engagement Metrics:
Interaction History: Support requests, training sessions attended
Pipeline Stage: Preparing to sell, negotiating, completed
Custom Fields:
Financial Goals: Personal investment objectives
Risk Profile: Individual risk tolerance for investments
Essential CRM Fields:
Field Category	Essential Fields	Description
Core Information	Seller Name, Role in Company, Equity Details	Identification and categorization of the seller’s role and equity type
Contact Details	Email Address, Phone Number, LinkedIn Profile	Key contact information for communication
Equity Management	Vesting Schedule, Current Equity Value, Selling Preferences	Details on equity vesting, valuation, and sale intentions
Compliance Information	KYC Compliance Status, Legal Restrictions on Share Sales	Regulatory compliance and restrictions on selling shares
Transaction History	Past Sales, Current Open Transactions	Historical and current transaction data
Engagement Metrics	Interaction History, Pipeline Stage	Tracking support interactions and transaction stages
Custom Fields	Financial Goals, Risk Profile	Personal financial objectives and investment risk tolerance
b. Early-Stage Investors and Shareholders
Core Information:
Investor Name
Equity Holding: Number of shares, percentage ownership
Investment Details: Date of investment, amount invested, valuation at time of investment
Contact Details:
Email Address
Phone Number
LinkedIn Profile
Investment Management:
Exit Preferences: Desired exit strategies, timelines
Current Equity Value: Estimated market value based on latest valuation
Investment Performance: Return on investment, growth metrics
Compliance and Regulatory Information:
KYC Compliance Status
Legal Restrictions on Share Sales
Transaction History:
Past Sales: Dates, volumes, realized gains/losses
Current Open Transactions: Status, amounts
Engagement Metrics:
Interaction History: Meetings, communications, proposals reviewed
Pipeline Stage: Preparing to sell, negotiating, completed
Custom Fields:
Strategic Involvement: Level of involvement in company’s strategic decisions
Risk Profile: Investment risk tolerance
Essential CRM Fields:
Field Category	Essential Fields	Description
Core Information	Investor Name, Equity Holding, Investment Details	Identification and categorization of the investor’s equity stake
Contact Details	Email Address, Phone Number, LinkedIn Profile	Key contact information for communication
Investment Management	Exit Preferences, Current Equity Value, Investment Performance	Details on investment expectations and performance metrics
Compliance Information	KYC Compliance Status, Legal Restrictions on Share Sales	Regulatory compliance and restrictions on selling shares
Transaction History	Past Sales, Current Open Transactions	Historical and current transaction data
Engagement Metrics	Interaction History, Pipeline Stage	Tracking communication and transaction stages
Custom Fields	Strategic Involvement, Risk Profile	Level of involvement in company strategies and investment risk tolerance
c. Institutional Shareholders Seeking Liquidity
Core Information:
Institution Name
Asset Class Focus: Private Equity, Venture Capital, Real Assets
Location(s)
Website URL
Contact Details:
Primary Contact Name
Title (e.g., Portfolio Manager, Head of Secondary Markets)
Email Address
Phone Number
LinkedIn Profile
Investment Metrics:
Total Equity Holding: Number of shares, percentage ownership
Funding Commitments: Amount committed, remaining capital
Investment Performance: Return on investment, current valuation
Compliance and Regulatory Information:
KYC Compliance Status
Internal Governance Requirements
Legal Restrictions on Share Sales
Liquidity Requirements:
Desired Liquidity Volume: Amount needed to liquidate
Liquidity Timeline: Urgency and deadlines for liquidity
Transaction History:
Past Sales: Dates, volumes, realized gains/losses
Current Open Transactions: Status, amounts
Engagement Metrics:
Interaction History: Strategic meetings, communications, due diligence reviews
Pipeline Stage: Identifying opportunities, active negotiations, committed deals
Custom Fields:
Exit Strategy Preferences: Preferred methods for liquidity (e.g., secondary sale, buyback)
Risk Management: Investment risk tolerance and governance policies
Essential CRM Fields:
Field Category	Essential Fields	Description
Core Information	Institution Name, Asset Class Focus, Location, Website URL	Identification and categorization of the institutional shareholder
Contact Details	Primary Contact Name, Title, Email, Phone, LinkedIn Profile	Key contact information for communication
Investment Metrics	Total Equity Holding, Funding Commitments, Investment Performance	Detailed financial information and performance metrics
Compliance Information	KYC Compliance Status, Internal Governance Requirements, Legal Restrictions on Share Sales	Regulatory and internal compliance details
Liquidity Requirements	Desired Liquidity Volume, Liquidity Timeline	Specific liquidity needs and timeframes
Transaction History	Past Sales, Current Open Transactions	Historical and current transaction data
Engagement Metrics	Interaction History, Pipeline Stage	Tracking communication and transaction stages
Custom Fields	Exit Strategy Preferences, Risk Management	Preferred liquidity methods and investment risk policies
Conclusion
By meticulously capturing and managing essential fields and critical information for each user segment—Early-Stage Startups, Growth-Stage Companies, Late-Stage Pre-IPO Companies, Institutional Investors, Accredited Individual Investors, Corporate Investors, Employees and Founders Holding Equity, Early-Stage Investors and Shareholders, and Institutional Shareholders Seeking Liquidity—Hiive can leverage Salesforce’s robust capabilities to deliver personalized, efficient, and compliant services. This comprehensive data structure not only enhances user experience but also empowers Hiive’s Operations Strategy team to drive operational excellence, optimize investor relations, and facilitate seamless secondary market transactions, thereby positioning Hiive as a leading marketplace in the venture-backed pre-IPO secondary market.


You are the best private equity and venture capital secondary market and CRM expert in the world. Generate the best answer to "Q3: What are the relationships among the customer groups and user segments you’ve provided?"

The answer must align to the answers to the previous questions:
Q1: What User Segments Would You Create Out of Hiive’s Customer Groups?

I would create the following user segments:

Issuers (Private Companies)
a. Early-Stage Startups
o Characteristics:
o Recently founded (typically within the first 2-5 years).
o Limited revenue streams; primarily focused on product development and market entry.
o High growth potential with scalable business models.
o Needs:
o Access to initial liquidity solutions to provide equity to employees and early investors.
o Platforms that facilitate seamless secondary transactions without disrupting foundational equity structures.
o Robust compliance and regulatory support to navigate early funding stages.
o Engagement Strategies:
o Offer educational resources on managing equity distributions.
o Provide dedicated onboarding support to integrate their processes with Salesforce.
o Implement automated workflows for equity transactions to reduce administrative burdens.
b. Growth-Stage Companies
o Characteristics:
o Established market presence with consistent revenue growth (typically 5-10 years old).
o Expanding operations, entering new markets, or pursuing strategic acquisitions.
o Intermediate to high valuation, often approaching pre-IPO stages.
o Needs:
o Enhanced liquidity solutions for a broader range of stakeholders, including late-stage investors and executives.
o Detailed analytics and reporting on secondary transactions to inform strategic decisions.
o Integration with Salesforce for streamlined investor relations and operational management.
o Engagement Strategies:
o Develop advanced Salesforce dashboards to monitor investment flows and stakeholder engagement.
o Facilitate strategic workshops on optimizing equity structures for scalability.
o Provide tailored support for complex secondary transaction scenarios.
c. Late-Stage Pre-IPO Companies
o Characteristics:
o Mature private companies preparing for public offerings.
o Substantial revenue streams and refined business operations.
o Significant investor base, including institutional backers and high-net-worth individuals.
o Needs:
o Sophisticated liquidity options to cater to a diverse investor and employee base.
o Comprehensive compliance solutions to ensure readiness for IPO regulations.
o Advanced reporting tools for performance tracking and investor transparency.
o Engagement Strategies:
o Implement Salesforce solutions for IPO readiness, including compliance tracking and reporting automation.
o Offer premium support services for handling high-volume and high-value transactions.
o Create dedicated channels for investor communications and updates.

Investors
a. Institutional Investors
o Sub-Segments:
o Venture Capital Firms: Focused on high-growth startups and innovative sectors.
o Private Equity Firms: Interested in mature companies with stable cash flows and potential for operational improvements.
o Family Offices: Managing wealth for high-net-worth families, seeking diversified investment opportunities.
o Sovereign Wealth Funds: Large-scale investors representing national funds, looking for strategic investments with long-term horizons.
o Characteristics:
o Significant capital under management.
o Expertise in evaluating and managing complex investments.
o Long-term investment horizons with strategic objectives.
o Needs:
o Exclusive access to high-potential investment opportunities not available to public markets.
o Comprehensive due diligence tools and in-depth reporting capabilities.
o Seamless integration with Salesforce for portfolio management and performance tracking.
o Engagement Strategies:
o Develop tailored Salesforce dashboards showcasing exclusive investment opportunities and fund performance.
o Facilitate direct communication channels with fund managers and issuers through Salesforce.
o Provide automated reporting and analytics to support informed investment decisions.
b. Accredited Individual Investors
o Characteristics:
o High-net-worth individuals meeting SEC’s accredited investor criteria.
o Diverse investment backgrounds, including angel investors, retirees, and successful entrepreneurs.
o Seeking portfolio diversification and access to lucrative pre-IPO opportunities.
o Needs:
o User-friendly platform for managing private investments and tracking performance.
o Transparent and detailed information on investment opportunities and historical performance.
o Personalized investor support and relationship management.
o Engagement Strategies:
o Implement personalized onboarding experiences and educational resources within Salesforce.
o Utilize targeted marketing campaigns to highlight investment opportunities matching individual preferences.
o Offer personalized advisory services through Salesforce’s relationship management tools.
c. Corporate Investors
o Characteristics:
o Large corporations seeking strategic investments in startups and emerging technologies.
o Aim to foster innovation, acquire new technologies, or gain market insights.
o Often engaged in co-investment opportunities alongside traditional venture capital and private equity firms.
o Needs:
o Access to cutting-edge startups and technological innovations.
o Platforms facilitating strategic alliances and co-investment opportunities.
o Advanced analytics to assess investment impact on corporate strategy and growth.
o Engagement Strategies:
o Create dedicated Salesforce segments for corporate investors to access tailored investment opportunities.
o Facilitate strategic partnership tools within Salesforce for co-investment management.
o Provide comprehensive impact analytics and reporting for strategic investment evaluations.

Sellers
a. Employees and Founders Holding Equity
o Characteristics:
o Employees (including executives) and founders possessing equity through stock options, RSUs, or direct share ownership.
o Motivated to seek liquidity for personal financial planning, diversification, or realizing gains.
o Varied levels of financial literacy and investment experience.
o Needs:
o Secure and compliant mechanisms to sell shares without administrative hassles.
o Clear communication and support throughout the selling process.
o Integration with Salesforce to track and manage share transactions and portfolio holdings.
o Engagement Strategies:
o Implement user-friendly Salesforce interfaces for initiating and tracking share sales.
o Provide educational resources and support via Salesforce’s knowledge base and support channels.
o Automate transaction workflows to ensure compliance and efficiency.
b. Early-Stage Investors and Shareholders
o Characteristics:
o Initial backers of the company, including angel investors and seed fund participants.
o Holding significant equity stakes with the objective of realizing returns through secondary sales or company exits.
o Often engaged in active roles within the company’s strategic decisions.
o Needs:
o Efficient and transparent secondary market transactions to liquidate equity holdings.
o Detailed reporting on share performance and investment outcomes.
o Relationship management tools to maintain connections with issuers and other investors.
o Engagement Strategies:
o Utilize Salesforce to facilitate seamless secondary transactions and provide real-time performance reports.
o Offer advanced analytics tools within Salesforce to evaluate investment performance and market trends.
o Create networking opportunities through Salesforce-integrated events and forums.
c. Institutional Shareholders Seeking Liquidity
o Characteristics:
o Large institutional investors holding substantial equity stakes in private companies.
o Require liquidity solutions to manage portfolio allocations and adjust investment strategies.
o Often subject to internal liquidity requirements and investment mandates.
o Needs:
o High-capacity liquidity solutions to facilitate large-volume secondary transactions.
o Comprehensive compliance and reporting features to meet institutional governance standards.
o Strategic support and advisory services to optimize exit strategies.
o Engagement Strategies:
o Develop Salesforce solutions for managing bulk transactions and adhering to compliance protocols.
o Provide dedicated support teams for institutional sellers through Salesforce’s customer service modules.
o Implement strategic advisory tools within Salesforce for optimizing exit timing and pricing.
 
Q2: What Essential Fields and Critical Information Would You Capture in a CRM System for Each User Segment You've Identified?

I have identified the following essential fields and critical information I would capture.

Issuers (Private Companies)
a. Early-Stage Startups
o Core Information:
o Company Name
o Industry/Sector
o Date Founded
o Location (Headquarters and Additional Offices)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., Founder, CEO)
o Email Address
o Phone Number
o LinkedIn Profile
o Operational Metrics:
o Number of Employees
o Annual Revenue (Current and Projected)
o Funding History: Previous funding rounds, amounts raised, lead investors
o Equity Structure: Total equity available for secondary sales, existing shareholders
o Investment Specifics:
o Current Valuation
o Funding Needs: Specific amounts sought through secondary transactions
o Use of Funds: Detailed allocation of raised capital (e.g., product development, marketing)
o Compliance and Regulatory Information:
o SEC Filings (if any)
o Compliance Certifications
o Legal Restrictions on Equity Sales
o Engagement Metrics:
o Interaction History: Meetings, communications, inquiries logged
o Pipeline Stage: Lead, Opportunity, Negotiation, Closed-Won/Lost
o Custom Fields:
o Growth Projections: Short-term and long-term growth targets
o Key Milestones: Achieved and upcoming milestones
b. Growth-Stage Companies
o Core Information:
o Company Name
o Industry/Sector
o Years in Operation
o Location (Headquarters and Additional Offices)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., CFO, COO)
o Email Address
o Phone Number
o LinkedIn Profile
o Operational Metrics:
o Number of Employees
o Annual Revenue (Current and Projected)
o Funding History: Detailed history of funding rounds, amounts, lead investors
o Valuation Metrics: Current valuation, EBITDA, growth rates
o Investment Specifics:
o Equity Available for Secondary Sales
o Investment Preferences: Types of investors sought, strategic goals for secondary transactions
o Target Acquisitions: Planned acquisitions and funding requirements
o Compliance and Regulatory Information:
o SEC Filings (if any)
o Compliance Certifications
o Legal Restrictions on Equity Sales
o Engagement Metrics:
o Interaction History: Detailed logs of all interactions with investors
o Pipeline Stage: Active opportunities, negotiations underway
o Custom Fields:
o Operational Improvements: Planned initiatives to enhance performance
o Strategic Goals: Short-term and long-term strategic objectives
c. Late-Stage Pre-IPO Companies
o Core Information:
o Company Name
o Industry/Sector
o Years in Operation
o Location (Headquarters and Additional Offices)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., CEO, CFO)
o Email Address
o Phone Number
o LinkedIn Profile
o Operational Metrics:
o Number of Employees
o Annual Revenue (Current and Projected)
o Funding History: Comprehensive details of all funding rounds, amounts, lead investors
o Valuation Metrics: Current pre-IPO valuation, EBITDA, growth rates
o Investment Specifics:
o Equity Available for Secondary Sales
o IPO Readiness Status: Compliance status, regulatory preparations
o Investment Preferences: Types of investors sought, strategic alignment for secondary transactions
o Compliance and Regulatory Information:
o SEC Filings (if any)
o IPO Documentation: Prospectus drafts, compliance checklists
o Legal Restrictions on Equity Sales
o Engagement Metrics:
o Interaction History: Detailed logs of all high-level interactions with institutional investors
o Pipeline Stage: Advanced stages of investment opportunities, final negotiations
o Custom Fields:
o IPO Timeline: Expected dates and milestones leading up to the IPO
o Investor Commitments: Details of committed investors leading up to IPO

Investors
a. Institutional Investors
Sub-Segments: Venture Capital Firms, Private Equity Firms, Family Offices, Sovereign Wealth Funds
o Core Information:
o Firm Name
o Sub-Segment Type: Venture Capital, Private Equity, Family Office, Sovereign Wealth Fund
o Location(s)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., Managing Partner, Investment Director)
o Email Address
o Phone Number
o LinkedIn Profile
o Investment Metrics:
o Capital Under Management
o Fund Details: Fund names, sizes, vintage years, committed capital
o Investment Focus: Preferred industries, stages, geographies
o Portfolio Information: Current investments, fund performance metrics
o Engagement Metrics:
o Interaction History: Meetings, communications, investment proposals reviewed
o Pipeline Stage: Active opportunities, due diligence, negotiations
o Engagement Score: Level of engagement based on interactions and interests
o Custom Fields:
o Strategic Objectives: Long-term goals for investments
o Preferred Investment Structures: Equity, debt, convertible notes
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Firm Name, Sub-Segment Type, Location, Website URL Basic identification and categorization of the firm
Contact Details Primary Contact Name, Title, Email, Phone, LinkedIn Profile Key individuals for communication and relationship management
Investment Metrics Capital Under Management, Fund Details, Investment Focus, Portfolio Information Detailed financial and strategic information on investment capabilities and interests
Engagement Metrics Interaction History, Pipeline Stage, Engagement Score Tracking communication and investment opportunity status
Custom Fields Strategic Objectives, Preferred Investment Structures Specific goals and preferences to tailor investment offers
b. Accredited Individual Investors
o Core Information:
o Investor Name
o Accreditation Status: Verified accreditation (Yes/No)
o Location
o Contact Information: Email, Phone Number, LinkedIn Profile
o Investment Metrics:
o Net Worth
o Annual Income
o Investment Preferences: Preferred industries, stages, investment sizes
o Current Portfolio Holdings: Existing private and public investments
o Engagement Metrics:
o Interaction History: Communications, webinars attended, proposals reviewed
o Pipeline Stage: Interested, actively considering, committed
o Engagement Score: Based on interaction frequency and depth
o Custom Fields:
o Risk Tolerance: High, medium, low
o Investment Goals: Income generation, capital appreciation, diversification
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Investor Name, Accreditation Status, Location, Contact Info Basic identification and verification of investor qualifications
Investment Metrics Net Worth, Annual Income, Investment Preferences, Portfolio Holdings Financial capacity and specific investment interests
Engagement Metrics Interaction History, Pipeline Stage, Engagement Score Tracking communication and investment consideration status
Custom Fields Risk Tolerance, Investment Goals Personal investment preferences and risk profiles
c. Corporate Investors
o Core Information:
o Corporation Name
o Industry/Sector
o Location(s)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., Corporate Development Manager, Head of Innovation)
o Email Address
o Phone Number
o LinkedIn Profile
o Investment Metrics:
o Investment Focus: Strategic sectors, technologies, co-investment preferences
o Capital Allocation: Budget for private market investments
o Portfolio Information: Current private and public investments, strategic alignments
o Engagement Metrics:
o Interaction History: Strategic meetings, partnership discussions
o Pipeline Stage: Identifying opportunities, active negotiations, committed deals
o Engagement Score: Based on interaction depth and strategic alignment
o Custom Fields:
o Strategic Goals: Innovation, technology acquisition, market expansion
o Preferred Investment Structures: Co-investments, majority/minority stakes
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Corporation Name, Industry/Sector, Location, Website URL Basic identification and categorization of the corporation
Contact Details Primary Contact Name, Title, Email, Phone, LinkedIn Profile Key individuals for communication and relationship management
Investment Metrics Investment Focus, Capital Allocation, Portfolio Information Detailed information on investment strategies and current holdings
Engagement Metrics Interaction History, Pipeline Stage, Engagement Score Tracking communication and investment opportunity status
Custom Fields Strategic Goals, Preferred Investment Structures Specific strategic objectives and investment preferences

Sellers
a. Employees and Founders Holding Equity
o Core Information:
o Seller Name
o Role in Company: Employee, Founder, Executive
o Equity Details: Type of equity (RSUs, Stock Options, Direct Shares), Number of Shares
o Contact Details:
o Email Address
o Phone Number
o LinkedIn Profile
o Equity Management:
o Vesting Schedule: Vesting dates, cliff periods
o Current Equity Value: Estimated market value based on latest valuation
o Selling Preferences: Desired sale amounts, timing, conditions
o Compliance and Regulatory Information:
o KYC Compliance Status
o Legal Restrictions on Share Sales
o Transaction History:
o Past Sales: Dates, volumes, realized gains/losses
o Current Open Transactions: Status, amounts
o Engagement Metrics:
o Interaction History: Support requests, training sessions attended
o Pipeline Stage: Preparing to sell, negotiating, completed
o Custom Fields:
o Financial Goals: Personal investment objectives
o Risk Profile: Individual risk tolerance for investments
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Seller Name, Role in Company, Equity Details Identification and categorization of the seller’s role and equity type
Contact Details Email Address, Phone Number, LinkedIn Profile Key contact information for communication
Equity Management Vesting Schedule, Current Equity Value, Selling Preferences Details on equity vesting, valuation, and sale intentions
Compliance Information KYC Compliance Status, Legal Restrictions on Share Sales Regulatory compliance and restrictions on selling shares
Transaction History Past Sales, Current Open Transactions Historical and current transaction data
Engagement Metrics Interaction History, Pipeline Stage Tracking support interactions and transaction stages
Custom Fields Financial Goals, Risk Profile Personal financial objectives and investment risk tolerance
b. Early-Stage Investors and Shareholders
o Core Information:
o Investor Name
o Equity Holding: Number of shares, percentage ownership
o Investment Details: Date of investment, amount invested, valuation at time of investment
o Contact Details:
o Email Address
o Phone Number
o LinkedIn Profile
o Investment Management:
o Exit Preferences: Desired exit strategies, timelines
o Current Equity Value: Estimated market value based on latest valuation
o Investment Performance: Return on investment, growth metrics
o Compliance and Regulatory Information:
o KYC Compliance Status
o Legal Restrictions on Share Sales
o Transaction History:
o Past Sales: Dates, volumes, realized gains/losses
o Current Open Transactions: Status, amounts
o Engagement Metrics:
o Interaction History: Meetings, communications, proposals reviewed
o Pipeline Stage: Preparing to sell, negotiating, completed
o Custom Fields:
o Strategic Involvement: Level of involvement in company’s strategic decisions
o Risk Profile: Investment risk tolerance
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Investor Name, Equity Holding, Investment Details Identification and categorization of the investor’s equity stake
Contact Details Email Address, Phone Number, LinkedIn Profile Key contact information for communication
Investment Management Exit Preferences, Current Equity Value, Investment Performance Details on investment expectations and performance metrics
Compliance Information KYC Compliance Status, Legal Restrictions on Share Sales Regulatory compliance and restrictions on selling shares
Transaction History Past Sales, Current Open Transactions Historical and current transaction data
Engagement Metrics Interaction History, Pipeline Stage Tracking communication and transaction stages
Custom Fields Strategic Involvement, Risk Profile Level of involvement in company strategies and investment risk tolerance
c. Institutional Shareholders Seeking Liquidity
o Core Information:
o Institution Name
o Asset Class Focus: Private Equity, Venture Capital, Real Assets
o Location(s)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., Portfolio Manager, Head of Secondary Markets)
o Email Address
o Phone Number
o LinkedIn Profile
o Investment Metrics:
o Total Equity Holding: Number of shares, percentage ownership
o Funding Commitments: Amount committed, remaining capital
o Investment Performance: Return on investment, current valuation
o Compliance and Regulatory Information:
o KYC Compliance Status
o Internal Governance Requirements
o Legal Restrictions on Share Sales
o Liquidity Requirements:
o Desired Liquidity Volume: Amount needed to liquidate
o Liquidity Timeline: Urgency and deadlines for liquidity
o Transaction History:
o Past Sales: Dates, volumes, realized gains/losses
o Current Open Transactions: Status, amounts
o Engagement Metrics:
o Interaction History: Strategic meetings, communications, due diligence reviews
o Pipeline Stage: Identifying opportunities, active negotiations, committed deals
o Custom Fields:
o Exit Strategy Preferences: Preferred methods for liquidity (e.g., secondary sale, buyback)
o Risk Management: Investment risk tolerance and governance policies
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Institution Name, Asset Class Focus, Location, Website URL Identification and categorization of the institutional shareholder
Contact Details Primary Contact Name, Title, Email, Phone, LinkedIn Profile Key contact information for communication
Investment Metrics Total Equity Holding, Funding Commitments, Investment Performance Detailed financial information and performance metrics
Compliance Information KYC Compliance Status, Internal Governance Requirements, Legal Restrictions on Share Sales Regulatory and internal compliance details
Liquidity Requirements Desired Liquidity Volume, Liquidity Timeline Specific liquidity needs and timeframes
Transaction History Past Sales, Current Open Transactions Historical and current transaction data
Engagement Metrics Interaction History, Pipeline Stage Tracking communication and transaction stages
Custom Fields Exit Strategy Preferences, Risk Management Preferred liquidity methods and investment risk policies

 


Q3: What Are the Relationships Among the Customer Groups and User Segments You’ve Provided?
Understanding the intricate relationships among Issuers, Investors, and Sellers is pivotal for fostering a cohesive and dynamic ecosystem within Hiive’s platform. These relationships facilitate seamless capital flows, strategic partnerships, and value creation across the marketplace. Below is a detailed exploration of these interconnections:

1. Issuers ↔ Investors
a. Investment Flow:

Issuers (Early-Stage Startups, Growth-Stage Companies, Late-Stage Pre-IPO Companies) seek capital to fuel their growth, expand operations, enter new markets, or prepare for public offerings.
Investors (Institutional Investors, Accredited Individual Investors, Corporate Investors) provide the necessary funds in exchange for equity stakes, aiming for returns through company growth and eventual exit events such as IPOs or acquisitions.
b. Ongoing Engagement:

Issuers maintain robust relationships with Investors to secure continuous funding rounds, strategic guidance, and operational support.
Investors engage with Issuers to monitor performance, provide strategic advice, and influence operational decisions to enhance investment returns.
c. Value Creation:

Issuers benefit from the capital infusion and strategic expertise provided by Investors, enabling them to scale effectively.
Investors gain from the appreciation of their equity stakes as Issuers grow and increase in valuation.
2. Issuers ↔ Sellers
a. Equity Management and Liquidity:

Sellers (Employees and Founders Holding Equity, Early-Stage Investors and Shareholders, Institutional Shareholders Seeking Liquidity) hold equity stakes in Issuers and may seek liquidity through secondary sales.
Issuers facilitate these secondary transactions by providing the infrastructure and compliance frameworks necessary for Sellers to liquidate their holdings without disrupting the company’s equity structure.
b. Compliance and Oversight:

Issuers ensure that all share sales comply with regulatory requirements and internal policies, maintaining control over who can acquire additional shares.
Sellers rely on Issuers for transparent processes and support during liquidity events, ensuring that sales are conducted smoothly and compliantly.
c. Value Realization:

Sellers realize financial gains through the sale of their equity, which incentivizes continued participation and investment within the Hiive ecosystem.
Issuers benefit from maintaining a motivated and financially secure team, as employee liquidity can enhance retention and satisfaction.
3. Investors ↔ Sellers
a. Secondary Market Transactions:

Investors participate in the secondary market by purchasing shares from Sellers, thereby diversifying their portfolios and accessing exclusive investment opportunities.
Sellers provide liquidity by offering their shares to Investors, enabling them to realize returns on their equity holdings.
b. Data and Analytics:

Investors leverage data from secondary transactions to inform investment strategies, assess market trends, and identify emerging opportunities.
Sellers utilize insights provided by Investors to determine optimal selling times and pricing, maximizing their financial gains.
c. Relationship Building:

Investors build relationships with Sellers to gain preferential access to future investment opportunities and insider insights into high-potential Issuers.
Sellers establish connections with Investors to facilitate future transactions and maintain a network of potential buyers.
4. Overall Ecosystem Dynamics
a. Value Creation and Growth:

Issuers grow and increase in valuation through investments from Investors, enhancing the value of equity held by Sellers.
Investors benefit from the appreciation of their investments and the liquidity provided by Sellers, ensuring a healthy cycle of investment and return.
Sellers realize financial gains through the sale of their equity, incentivizing continued participation and investment within the Hiive ecosystem.
b. Feedback Loops and Network Effects:

Successful transactions between Investors and Sellers enhance platform credibility and attractiveness, drawing more Issuers and Investors to Hiive.
Enhanced liquidity and diverse investment opportunities create a virtuous cycle, fostering sustained growth and a robust marketplace.
Data-driven insights from Salesforce analytics inform strategic improvements, ensuring that Hiive continually meets the evolving needs of all user segments.
c. Synergistic Relationships:

Issuers, Investors, and Sellers interact synergistically to create a thriving marketplace where capital flows efficiently, opportunities are maximized, and value is continuously generated.
Salesforce acts as the central hub, facilitating seamless interactions, data sharing, and relationship management among all segments, thereby enhancing overall operational excellence and user satisfaction.
Conclusion
The relationships among Issuers, Investors, and Sellers form the backbone of Hiive’s platform, creating a dynamic and synergistic ecosystem. By understanding and optimizing these interconnections, Hiive can ensure seamless capital flows, foster strategic partnerships, and drive sustained growth. Leveraging Salesforce’s robust capabilities to manage these relationships effectively will further enhance Hiive’s position as a leading marketplace in the venture-backed pre-IPO secondary market.


You are the best private equity and venture capital secondary market and CRM expert in the world. Generate the best answer to "Using your findings from the previous questions, propose an initiative to boost investor activity on the platform. You may include but are not limited to, proposed messaging, SalesForce tools used, criteria for identifying investors, steps taken to execute the initiative, and methods for measuring success."

Sales Cloud
Set the foundation for revenue growth with sales force automation. Close deals faster with guided selling and AI-powered deal insights. Predict future sales with visibility into pipeline and forecasts. Scale easily with automated sales processes and workflows — all built on the #1 trusted AI CRM for sales.

Leading sales teams grow with sales force automation software.

Honeywell
Jet It
Inspirato
Cytiva
Fisher & Paykel

Empower your entire sales team with Sales Cloud.
Maximize rep productivity, unlock valuable insights across the sales cycle, and automate processes and workflows on one platform to accelerate growth.

Build strong customer relationships and grow revenue with a single source of truth.

Activity Management
Automatically capture emails, events, and other types of engagement activities directly in CRM. Manage activity data associated to the relevant leads, contacts, accounts, and opportunities in one spot, creating a single source of truth. Get visibility into selling activities at scale with out-of-the-box reporting to make it easy to focus on what matters most.

Lead Management
Connect with customers and track deals across every channel. Use AI to prioritize the best leads based on the customer profiles that drive the most revenue. Increase rep efficiency with actionable, prioritized to-do lists right in Salesforce.

Account and Opportunity Management
Move deals forward faster with specific guidance for sellers throughout the sales process. Get deal-specific insights, build account plans, and easily unify opportunity and account data for a single customer profile — whether you're working directly in your CRM, or on the go.

Get visibility to stay on track and exceed targets.

Forecast Management
Build accurate forecasts in real time to drive predictable growth. Tailor metrics to align with business goals. Drive accountability and keep everyone on track with a shared understanding of top deals and forecast trends.

Pipeline Management
Maintain and manage pipeline in a single, consolidated view. Track changes over time with built-in charts. Focus on the most important deals with the help of AI and use deal insights to provide proactive coaching.

Reports and Dashboards
Use data to drive action with a suite of out-of-the-box reporting tools. Easily visualize metrics with dashboards and quickly drill into the key drivers of sales performance. Track lead volume, activity conversion rates, and sales pipeline with ease. Personalize reports and dashboards so every member of the sales team has the information they need to sell faster.

Drive productivity with automated sales processes.

Workflow and Process Automation
Drive seller efficiency by automating complex sales processes and workflows with drag and drop simplicity. Manage and maintain territory assignments to optimize account coverage and align with sales goals.

Quoting and Contract Approvals
Close deals faster with standard and templated quotes synced to sales opportunities. Speed up the contract approval process with automated workflows directly within Salesforce.

CRM Everywhere and Collaboration
Access and update CRM from anywhere with the browser extension and mobile app. Collaborate across teams to quickly swarm on sales opportunities. Create mutual account plans and share knowledge, files, and data to keep teams and customer informed at every stage.

Sales Engagement
Boost productivity with sales engagement built directly into your CRM. Provide reps one place to work from and connect with customers in all channels. Give reps the time to build meaningful relationships by automating tasks like email follow-ups and meeting booking. Use the AI insights and recommendations of our sales engagement platform to identify prospects most likely to close.

What can sales teams do with a sales engagement platform?
Engage prospects and customers more effectively at every stage of the deal.

Guide sellers with automation and AI.
Sales Engagement Intelligence

Connected Communication
Unify all sales activities like emails, phone calls, social touches, and tasks into a single to-do list. Access and action every task from a single, central hub in the CRM. Create a single seller experience that tracks every prospect through the process.

Sales Cadences
Guide sellers with step-by-step instructions for how to prospect and bring best practices to the whole sales team. Include email, phone, and social touch sales tasks. Automate prospecting to keep leads moving. Provide reps with AI recommendations to further customize their own workflow.

Engagement Intelligence
Engage the right prospects with less effort, with AI recommendations on your next best action. Improve conversations with insights from emails and calls. Surface top leads automatically and focus on those most likely to convert.

Prospecting Center
Discover your next best customer with buying signal powered by Data Cloud. Calculate fit, intent, and engagement by unifying CRM and external data. Identify and prioritize high-value prospects with a complete view of web engagement, marketing campaigns, firmographic data, and more.

Access CRM data from everywhere you work.
Sales Cloud Everywhere

Email Productivity Tools
Speed up outreach with an inbox infused with data and automation. Improve customer follow up by tracking engagement. Keep up with top prospects more efficiently with email templates and instant notifications for follow-up tasks. Simplify meeting scheduling and allow customers to book time directly with sellers with calendar integrations and personalized scheduling links.

CRM Extension
Access and update CRM from anywhere. Write emails, check off to-do lists, send calendar links, use email templates, and update records via Workspace — all without leaving the web.

Buyer Assistant
Replace web-to-lead forms with AI-powered conversations. Connect buyers with relevant product information. Turn high-value web traffic into high-value leads with an automated meeting book connected directly to your CRM.

Get key sales engagement intel to close more deals — fast.
Einstein Conversation Insights (ECI)

Customer Signals
Unblock deals with call insights. Analyze every call automatically for full visibility into competitors, objections, pricing, and questions asked. Use call snippets to surface key insights on individual opportunities. Uncover themes that impact team performance and take action with the right intel.

Automated transcripts
Eliminate notetaking with automated transcripts that capture every word. Prompt next steps based on questions, and generate action items from mentions. Deliver in-app notifications to drive rep follow-through and keep deals moving.

Playlists of Best Practice Calls
Create a playlist of successful calls so reps can replicate what works. Personalize coaching to every seller with recommendations and conversation highlights. Share feedback directly in the call being reviewed with contextual comments.

Docs
Sales Productivity
Sales Dialer
Use Sales Dialer to access telephony features without ever leaving Salesforce. Make and receive calls, add call notes, and log call information with ease. It just takes a single click from phone number fields in Lightning Experience, such as numbers on contacts, leads, and list views.

Required Editions
Available in: Lightning Experience
Available with Sales Cloud and Service Cloud in: Essentials, Professional, Enterprise, Performance, and Unlimited Editions

Sales Dialer is available for an additional cost as an add-on license.

Guidelines for Making and Receiving Calls
Review guidelines for making and receiving calls, including basic calling features and tips on how to get started.
Set Up Sales Dialer
Dialer allows users to access telephony features directly in Salesforce.

Docs
Sales Productivity
Guidelines for Making and Receiving Calls
Review guidelines for making and receiving calls, including basic calling features and tips on how to get started.

Required Editions
Available in: Lightning Experience
Available with Sales Cloud and Service Cloud in: Essentials, Professional, Enterprise, Performance, and Unlimited Editions

Sales Dialer is available for an additional cost as an add-on license.

Note
Note For now, we support outgoing calls to the United States (not including Puerto Rico) and Canada only.
Dialing call window
The call appears in the utility bar at the bottom of your screen, so you can multitask while you’re on a call. You can access relevant records, add call notes directly in the call panel, or create tasks, events, or other records related to the call.

When you call a landline number that’s busy, the call ends without ringing or a busy signal.

Tip
Tip Assign a Dialer number so the calls you make don’t appear to be coming from an unknown number.
Select Auto-log to have call details added to the activity timeline automatically. A call log is created if the number dialed is related to an existing record. If it isn’t, a task is created, but a call log related to a record is not.

You can also add more details manually after a call has ended.

Log call dialog
Optionally, you can also receive calls with Dialer. Incoming calls show a list of related activities, so you have access to relevant information before you’ve even answered the call.

Incoming call window
If you don’t answer within 30 seconds or dismiss the call, the call ends. If you’re not on Lightning Experience when someone calls, the person calling hears a message that you’re not available. If voicemail is enabled in your org, you can also receive and store up to 20 voicemail messages.

With the voicemail drop feature, you can also record messages to leave when you make a call and get someone else’s voicemail. For best results, we recommend reps start their message as soon as the recording begins. Messages can be up to 1 minute long. For now, reps can have 10 voicemail drop recordings.

For information about setting up Sales Dialer, see Set Up Sales Dialer.

Assign a Dialer Number
Assign a Dialer number from your personal settings so the calls you make and receive don’t appear to be coming from an unknown number.
Assign a Forwarding Number for Dialer
Get your Dialer calls forwarded to your mobile phone or main business line so you never miss a call. You can easily assign a forwarding number from your personal settings.
Sales Dialer Best Practices
For the best calling experience, use a hardwired connection to your network with adequate bandwidth, use a wired headset, and set up the proper environment on your machine.

Set Up Sales Dialer
Dialer allows users to access telephony features directly in Salesforce.

Required Editions
Available in: Lightning Experience
Available with Sales Cloud and Service Cloud in: Essentials, Professional, Enterprise, Performance, and Unlimited Editions

Sales Dialer is available for an additional cost as an add-on license.

To use Dialer in your org:

Dialer Prerequisites
Plan out your implementation before enabling Dialer in your organization.
Dialer Limitations
Be aware of the limitations that apply to Sales Dialer.
Enable Sales Dialer
Turn on Dialer from the Dialer Settings page in Lightning Experience.
Add Dialer to the Utility Bar
Use the App Manager to make Dialer available from the utility bar at the bottom of the page. The utility bar gives your sales reps quick access to commonly used tools.
Assign the Dialer Permission Set to Users
Assign the Dialer licenses to users from Setup.
Enable Local Presence
Show local numbers when calling customers with Sales Dialer. Enable the feature from the Local Presence page in Setup. Dialer users can then select Local Presence under their personal settings.
Enable Call Monitoring
Use Call Monitoring to coach sales reps using Sales Dialer. Enable the feature from the Dialer Settings page in Setup, then create a permission set with the Access Dialer Monitoring permission and assign it to managers.
How Do I Manage Dialer Usage?
See your org’s Dialer usage from Setup.

The answer must align to the answers to the previous questions:

Q1: What User Segments Would You Create Out of Hiive’s Customer Groups?

I would create the following user segments:

Issuers (Private Companies)
a. Early-Stage Startups
o Characteristics:
o Recently founded (typically within the first 2-5 years).
o Limited revenue streams; primarily focused on product development and market entry.
o High growth potential with scalable business models.
o Needs:
o Access to initial liquidity solutions to provide equity to employees and early investors.
o Platforms that facilitate seamless secondary transactions without disrupting foundational equity structures.
o Robust compliance and regulatory support to navigate early funding stages.
o Engagement Strategies:
o Offer educational resources on managing equity distributions.
o Provide dedicated onboarding support to integrate their processes with Salesforce.
o Implement automated workflows for equity transactions to reduce administrative burdens.
b. Growth-Stage Companies
o Characteristics:
o Established market presence with consistent revenue growth (typically 5-10 years old).
o Expanding operations, entering new markets, or pursuing strategic acquisitions.
o Intermediate to high valuation, often approaching pre-IPO stages.
o Needs:
o Enhanced liquidity solutions for a broader range of stakeholders, including late-stage investors and executives.
o Detailed analytics and reporting on secondary transactions to inform strategic decisions.
o Integration with Salesforce for streamlined investor relations and operational management.
o Engagement Strategies:
o Develop advanced Salesforce dashboards to monitor investment flows and stakeholder engagement.
o Facilitate strategic workshops on optimizing equity structures for scalability.
o Provide tailored support for complex secondary transaction scenarios.
c. Late-Stage Pre-IPO Companies
o Characteristics:
o Mature private companies preparing for public offerings.
o Substantial revenue streams and refined business operations.
o Significant investor base, including institutional backers and high-net-worth individuals.
o Needs:
o Sophisticated liquidity options to cater to a diverse investor and employee base.
o Comprehensive compliance solutions to ensure readiness for IPO regulations.
o Advanced reporting tools for performance tracking and investor transparency.
o Engagement Strategies:
o Implement Salesforce solutions for IPO readiness, including compliance tracking and reporting automation.
o Offer premium support services for handling high-volume and high-value transactions.
o Create dedicated channels for investor communications and updates.

Investors
a. Institutional Investors
o Sub-Segments:
o Venture Capital Firms: Focused on high-growth startups and innovative sectors.
o Private Equity Firms: Interested in mature companies with stable cash flows and potential for operational improvements.
o Family Offices: Managing wealth for high-net-worth families, seeking diversified investment opportunities.
o Sovereign Wealth Funds: Large-scale investors representing national funds, looking for strategic investments with long-term horizons.
o Characteristics:
o Significant capital under management.
o Expertise in evaluating and managing complex investments.
o Long-term investment horizons with strategic objectives.
o Needs:
o Exclusive access to high-potential investment opportunities not available to public markets.
o Comprehensive due diligence tools and in-depth reporting capabilities.
o Seamless integration with Salesforce for portfolio management and performance tracking.
o Engagement Strategies:
o Develop tailored Salesforce dashboards showcasing exclusive investment opportunities and fund performance.
o Facilitate direct communication channels with fund managers and issuers through Salesforce.
o Provide automated reporting and analytics to support informed investment decisions.
b. Accredited Individual Investors
o Characteristics:
o High-net-worth individuals meeting SEC’s accredited investor criteria.
o Diverse investment backgrounds, including angel investors, retirees, and successful entrepreneurs.
o Seeking portfolio diversification and access to lucrative pre-IPO opportunities.
o Needs:
o User-friendly platform for managing private investments and tracking performance.
o Transparent and detailed information on investment opportunities and historical performance.
o Personalized investor support and relationship management.
o Engagement Strategies:
o Implement personalized onboarding experiences and educational resources within Salesforce.
o Utilize targeted marketing campaigns to highlight investment opportunities matching individual preferences.
o Offer personalized advisory services through Salesforce’s relationship management tools.
c. Corporate Investors
o Characteristics:
o Large corporations seeking strategic investments in startups and emerging technologies.
o Aim to foster innovation, acquire new technologies, or gain market insights.
o Often engaged in co-investment opportunities alongside traditional venture capital and private equity firms.
o Needs:
o Access to cutting-edge startups and technological innovations.
o Platforms facilitating strategic alliances and co-investment opportunities.
o Advanced analytics to assess investment impact on corporate strategy and growth.
o Engagement Strategies:
o Create dedicated Salesforce segments for corporate investors to access tailored investment opportunities.
o Facilitate strategic partnership tools within Salesforce for co-investment management.
o Provide comprehensive impact analytics and reporting for strategic investment evaluations.

Sellers
a. Employees and Founders Holding Equity
o Characteristics:
o Employees (including executives) and founders possessing equity through stock options, RSUs, or direct share ownership.
o Motivated to seek liquidity for personal financial planning, diversification, or realizing gains.
o Varied levels of financial literacy and investment experience.
o Needs:
o Secure and compliant mechanisms to sell shares without administrative hassles.
o Clear communication and support throughout the selling process.
o Integration with Salesforce to track and manage share transactions and portfolio holdings.
o Engagement Strategies:
o Implement user-friendly Salesforce interfaces for initiating and tracking share sales.
o Provide educational resources and support via Salesforce’s knowledge base and support channels.
o Automate transaction workflows to ensure compliance and efficiency.
b. Early-Stage Investors and Shareholders
o Characteristics:
o Initial backers of the company, including angel investors and seed fund participants.
o Holding significant equity stakes with the objective of realizing returns through secondary sales or company exits.
o Often engaged in active roles within the company’s strategic decisions.
o Needs:
o Efficient and transparent secondary market transactions to liquidate equity holdings.
o Detailed reporting on share performance and investment outcomes.
o Relationship management tools to maintain connections with issuers and other investors.
o Engagement Strategies:
o Utilize Salesforce to facilitate seamless secondary transactions and provide real-time performance reports.
o Offer advanced analytics tools within Salesforce to evaluate investment performance and market trends.
o Create networking opportunities through Salesforce-integrated events and forums.
c. Institutional Shareholders Seeking Liquidity
o Characteristics:
o Large institutional investors holding substantial equity stakes in private companies.
o Require liquidity solutions to manage portfolio allocations and adjust investment strategies.
o Often subject to internal liquidity requirements and investment mandates.
o Needs:
o High-capacity liquidity solutions to facilitate large-volume secondary transactions.
o Comprehensive compliance and reporting features to meet institutional governance standards.
o Strategic support and advisory services to optimize exit strategies.
o Engagement Strategies:
o Develop Salesforce solutions for managing bulk transactions and adhering to compliance protocols.
o Provide dedicated support teams for institutional sellers through Salesforce’s customer service modules.
o Implement strategic advisory tools within Salesforce for optimizing exit timing and pricing.
 
Q2: What Essential Fields and Critical Information Would You Capture in a CRM System for Each User Segment You've Identified?

I have identified the following essential fields and critical information I would capture.

Issuers (Private Companies)
a. Early-Stage Startups
o Core Information:
o Company Name
o Industry/Sector
o Date Founded
o Location (Headquarters and Additional Offices)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., Founder, CEO)
o Email Address
o Phone Number
o LinkedIn Profile
o Operational Metrics:
o Number of Employees
o Annual Revenue (Current and Projected)
o Funding History: Previous funding rounds, amounts raised, lead investors
o Equity Structure: Total equity available for secondary sales, existing shareholders
o Investment Specifics:
o Current Valuation
o Funding Needs: Specific amounts sought through secondary transactions
o Use of Funds: Detailed allocation of raised capital (e.g., product development, marketing)
o Compliance and Regulatory Information:
o SEC Filings (if any)
o Compliance Certifications
o Legal Restrictions on Equity Sales
o Engagement Metrics:
o Interaction History: Meetings, communications, inquiries logged
o Pipeline Stage: Lead, Opportunity, Negotiation, Closed-Won/Lost
o Custom Fields:
o Growth Projections: Short-term and long-term growth targets
o Key Milestones: Achieved and upcoming milestones
b. Growth-Stage Companies
o Core Information:
o Company Name
o Industry/Sector
o Years in Operation
o Location (Headquarters and Additional Offices)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., CFO, COO)
o Email Address
o Phone Number
o LinkedIn Profile
o Operational Metrics:
o Number of Employees
o Annual Revenue (Current and Projected)
o Funding History: Detailed history of funding rounds, amounts, lead investors
o Valuation Metrics: Current valuation, EBITDA, growth rates
o Investment Specifics:
o Equity Available for Secondary Sales
o Investment Preferences: Types of investors sought, strategic goals for secondary transactions
o Target Acquisitions: Planned acquisitions and funding requirements
o Compliance and Regulatory Information:
o SEC Filings (if any)
o Compliance Certifications
o Legal Restrictions on Equity Sales
o Engagement Metrics:
o Interaction History: Detailed logs of all interactions with investors
o Pipeline Stage: Active opportunities, negotiations underway
o Custom Fields:
o Operational Improvements: Planned initiatives to enhance performance
o Strategic Goals: Short-term and long-term strategic objectives
c. Late-Stage Pre-IPO Companies
o Core Information:
o Company Name
o Industry/Sector
o Years in Operation
o Location (Headquarters and Additional Offices)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., CEO, CFO)
o Email Address
o Phone Number
o LinkedIn Profile
o Operational Metrics:
o Number of Employees
o Annual Revenue (Current and Projected)
o Funding History: Comprehensive details of all funding rounds, amounts, lead investors
o Valuation Metrics: Current pre-IPO valuation, EBITDA, growth rates
o Investment Specifics:
o Equity Available for Secondary Sales
o IPO Readiness Status: Compliance status, regulatory preparations
o Investment Preferences: Types of investors sought, strategic alignment for secondary transactions
o Compliance and Regulatory Information:
o SEC Filings (if any)
o IPO Documentation: Prospectus drafts, compliance checklists
o Legal Restrictions on Equity Sales
o Engagement Metrics:
o Interaction History: Detailed logs of all high-level interactions with institutional investors
o Pipeline Stage: Advanced stages of investment opportunities, final negotiations
o Custom Fields:
o IPO Timeline: Expected dates and milestones leading up to the IPO
o Investor Commitments: Details of committed investors leading up to IPO

Investors
a. Institutional Investors
Sub-Segments: Venture Capital Firms, Private Equity Firms, Family Offices, Sovereign Wealth Funds
o Core Information:
o Firm Name
o Sub-Segment Type: Venture Capital, Private Equity, Family Office, Sovereign Wealth Fund
o Location(s)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., Managing Partner, Investment Director)
o Email Address
o Phone Number
o LinkedIn Profile
o Investment Metrics:
o Capital Under Management
o Fund Details: Fund names, sizes, vintage years, committed capital
o Investment Focus: Preferred industries, stages, geographies
o Portfolio Information: Current investments, fund performance metrics
o Engagement Metrics:
o Interaction History: Meetings, communications, investment proposals reviewed
o Pipeline Stage: Active opportunities, due diligence, negotiations
o Engagement Score: Level of engagement based on interactions and interests
o Custom Fields:
o Strategic Objectives: Long-term goals for investments
o Preferred Investment Structures: Equity, debt, convertible notes
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Firm Name, Sub-Segment Type, Location, Website URL Basic identification and categorization of the firm
Contact Details Primary Contact Name, Title, Email, Phone, LinkedIn Profile Key individuals for communication and relationship management
Investment Metrics Capital Under Management, Fund Details, Investment Focus, Portfolio Information Detailed financial and strategic information on investment capabilities and interests
Engagement Metrics Interaction History, Pipeline Stage, Engagement Score Tracking communication and investment opportunity status
Custom Fields Strategic Objectives, Preferred Investment Structures Specific goals and preferences to tailor investment offers
b. Accredited Individual Investors
o Core Information:
o Investor Name
o Accreditation Status: Verified accreditation (Yes/No)
o Location
o Contact Information: Email, Phone Number, LinkedIn Profile
o Investment Metrics:
o Net Worth
o Annual Income
o Investment Preferences: Preferred industries, stages, investment sizes
o Current Portfolio Holdings: Existing private and public investments
o Engagement Metrics:
o Interaction History: Communications, webinars attended, proposals reviewed
o Pipeline Stage: Interested, actively considering, committed
o Engagement Score: Based on interaction frequency and depth
o Custom Fields:
o Risk Tolerance: High, medium, low
o Investment Goals: Income generation, capital appreciation, diversification
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Investor Name, Accreditation Status, Location, Contact Info Basic identification and verification of investor qualifications
Investment Metrics Net Worth, Annual Income, Investment Preferences, Portfolio Holdings Financial capacity and specific investment interests
Engagement Metrics Interaction History, Pipeline Stage, Engagement Score Tracking communication and investment consideration status
Custom Fields Risk Tolerance, Investment Goals Personal investment preferences and risk profiles
c. Corporate Investors
o Core Information:
o Corporation Name
o Industry/Sector
o Location(s)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., Corporate Development Manager, Head of Innovation)
o Email Address
o Phone Number
o LinkedIn Profile
o Investment Metrics:
o Investment Focus: Strategic sectors, technologies, co-investment preferences
o Capital Allocation: Budget for private market investments
o Portfolio Information: Current private and public investments, strategic alignments
o Engagement Metrics:
o Interaction History: Strategic meetings, partnership discussions
o Pipeline Stage: Identifying opportunities, active negotiations, committed deals
o Engagement Score: Based on interaction depth and strategic alignment
o Custom Fields:
o Strategic Goals: Innovation, technology acquisition, market expansion
o Preferred Investment Structures: Co-investments, majority/minority stakes
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Corporation Name, Industry/Sector, Location, Website URL Basic identification and categorization of the corporation
Contact Details Primary Contact Name, Title, Email, Phone, LinkedIn Profile Key individuals for communication and relationship management
Investment Metrics Investment Focus, Capital Allocation, Portfolio Information Detailed information on investment strategies and current holdings
Engagement Metrics Interaction History, Pipeline Stage, Engagement Score Tracking communication and investment opportunity status
Custom Fields Strategic Goals, Preferred Investment Structures Specific strategic objectives and investment preferences

Sellers
a. Employees and Founders Holding Equity
o Core Information:
o Seller Name
o Role in Company: Employee, Founder, Executive
o Equity Details: Type of equity (RSUs, Stock Options, Direct Shares), Number of Shares
o Contact Details:
o Email Address
o Phone Number
o LinkedIn Profile
o Equity Management:
o Vesting Schedule: Vesting dates, cliff periods
o Current Equity Value: Estimated market value based on latest valuation
o Selling Preferences: Desired sale amounts, timing, conditions
o Compliance and Regulatory Information:
o KYC Compliance Status
o Legal Restrictions on Share Sales
o Transaction History:
o Past Sales: Dates, volumes, realized gains/losses
o Current Open Transactions: Status, amounts
o Engagement Metrics:
o Interaction History: Support requests, training sessions attended
o Pipeline Stage: Preparing to sell, negotiating, completed
o Custom Fields:
o Financial Goals: Personal investment objectives
o Risk Profile: Individual risk tolerance for investments
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Seller Name, Role in Company, Equity Details Identification and categorization of the seller’s role and equity type
Contact Details Email Address, Phone Number, LinkedIn Profile Key contact information for communication
Equity Management Vesting Schedule, Current Equity Value, Selling Preferences Details on equity vesting, valuation, and sale intentions
Compliance Information KYC Compliance Status, Legal Restrictions on Share Sales Regulatory compliance and restrictions on selling shares
Transaction History Past Sales, Current Open Transactions Historical and current transaction data
Engagement Metrics Interaction History, Pipeline Stage Tracking support interactions and transaction stages
Custom Fields Financial Goals, Risk Profile Personal financial objectives and investment risk tolerance
b. Early-Stage Investors and Shareholders
o Core Information:
o Investor Name
o Equity Holding: Number of shares, percentage ownership
o Investment Details: Date of investment, amount invested, valuation at time of investment
o Contact Details:
o Email Address
o Phone Number
o LinkedIn Profile
o Investment Management:
o Exit Preferences: Desired exit strategies, timelines
o Current Equity Value: Estimated market value based on latest valuation
o Investment Performance: Return on investment, growth metrics
o Compliance and Regulatory Information:
o KYC Compliance Status
o Legal Restrictions on Share Sales
o Transaction History:
o Past Sales: Dates, volumes, realized gains/losses
o Current Open Transactions: Status, amounts
o Engagement Metrics:
o Interaction History: Meetings, communications, proposals reviewed
o Pipeline Stage: Preparing to sell, negotiating, completed
o Custom Fields:
o Strategic Involvement: Level of involvement in company’s strategic decisions
o Risk Profile: Investment risk tolerance
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Investor Name, Equity Holding, Investment Details Identification and categorization of the investor’s equity stake
Contact Details Email Address, Phone Number, LinkedIn Profile Key contact information for communication
Investment Management Exit Preferences, Current Equity Value, Investment Performance Details on investment expectations and performance metrics
Compliance Information KYC Compliance Status, Legal Restrictions on Share Sales Regulatory compliance and restrictions on selling shares
Transaction History Past Sales, Current Open Transactions Historical and current transaction data
Engagement Metrics Interaction History, Pipeline Stage Tracking communication and transaction stages
Custom Fields Strategic Involvement, Risk Profile Level of involvement in company strategies and investment risk tolerance
c. Institutional Shareholders Seeking Liquidity
o Core Information:
o Institution Name
o Asset Class Focus: Private Equity, Venture Capital, Real Assets
o Location(s)
o Website URL
o Contact Details:
o Primary Contact Name
o Title (e.g., Portfolio Manager, Head of Secondary Markets)
o Email Address
o Phone Number
o LinkedIn Profile
o Investment Metrics:
o Total Equity Holding: Number of shares, percentage ownership
o Funding Commitments: Amount committed, remaining capital
o Investment Performance: Return on investment, current valuation
o Compliance and Regulatory Information:
o KYC Compliance Status
o Internal Governance Requirements
o Legal Restrictions on Share Sales
o Liquidity Requirements:
o Desired Liquidity Volume: Amount needed to liquidate
o Liquidity Timeline: Urgency and deadlines for liquidity
o Transaction History:
o Past Sales: Dates, volumes, realized gains/losses
o Current Open Transactions: Status, amounts
o Engagement Metrics:
o Interaction History: Strategic meetings, communications, due diligence reviews
o Pipeline Stage: Identifying opportunities, active negotiations, committed deals
o Custom Fields:
o Exit Strategy Preferences: Preferred methods for liquidity (e.g., secondary sale, buyback)
o Risk Management: Investment risk tolerance and governance policies
o Essential CRM Fields:
Field Category Essential Fields Description
Core Information Institution Name, Asset Class Focus, Location, Website URL Identification and categorization of the institutional shareholder
Contact Details Primary Contact Name, Title, Email, Phone, LinkedIn Profile Key contact information for communication
Investment Metrics Total Equity Holding, Funding Commitments, Investment Performance Detailed financial information and performance metrics
Compliance Information KYC Compliance Status, Internal Governance Requirements, Legal Restrictions on Share Sales Regulatory and internal compliance details
Liquidity Requirements Desired Liquidity Volume, Liquidity Timeline Specific liquidity needs and timeframes
Transaction History Past Sales, Current Open Transactions Historical and current transaction data
Engagement Metrics Interaction History, Pipeline Stage Tracking communication and transaction stages
Custom Fields Exit Strategy Preferences, Risk Management Preferred liquidity methods and investment risk policies

 
Q3: What Are the Relationships Among the Customer Groups and User Segments You’ve Provided?

Understanding the intricate relationships among Issuers, Investors, and Sellers is pivotal for fostering a cohesive and dynamic ecosystem within Hiive’s platform. These relationships facilitate seamless capital flows, strategic partnerships, and value creation across the marketplace. Below is a detailed exploration of these interconnections:

Issuers ↔ Investors
a. Investment Flow:
o Issuers (Early-Stage Startups, Growth-Stage Companies, Late-Stage Pre-IPO Companies) seek capital to fuel their growth, expand operations, enter new markets, or prepare for public offerings.
o Investors (Institutional Investors, Accredited Individual Investors, Corporate Investors) provide the necessary funds in exchange for equity stakes, aiming for returns through company growth and eventual exit events such as IPOs or acquisitions.
b. Ongoing Engagement:
o Issuers maintain robust relationships with Investors to secure continuous funding rounds, strategic guidance, and operational support.
o Investors engage with Issuers to monitor performance, provide strategic advice, and influence operational decisions to enhance investment returns.
c. Value Creation:
o Issuers benefit from the capital infusion and strategic expertise provided by Investors, enabling them to scale effectively.
o Investors gain from the appreciation of their equity stakes as Issuers grow and increase in valuation.

Issuers ↔ Sellers
a. Equity Management and Liquidity:
o Sellers (Employees and Founders Holding Equity, Early-Stage Investors and Shareholders, Institutional Shareholders Seeking Liquidity) hold equity stakes in Issuers and may seek liquidity through secondary sales.
o Issuers facilitate these secondary transactions by providing the infrastructure and compliance frameworks necessary for Sellers to liquidate their holdings without disrupting the company’s equity structure.
b. Compliance and Oversight:
o Issuers ensure that all share sales comply with regulatory requirements and internal policies, maintaining control over who can acquire additional shares.
o Sellers rely on Issuers for transparent processes and support during liquidity events, ensuring that sales are conducted smoothly and compliantly.
c. Value Realization:
o Sellers realize financial gains through the sale of their equity, which incentivizes continued participation and investment within the Hiive ecosystem.
o Issuers benefit from maintaining a motivated and financially secure team, as employee liquidity can enhance retention and satisfaction.

Investors ↔ Sellers
a. Secondary Market Transactions:
o Investors participate in the secondary market by purchasing shares from Sellers, thereby diversifying their portfolios and accessing exclusive investment opportunities.
o Sellers provide liquidity by offering their shares to Investors, enabling them to realize returns on their equity holdings.
b. Data and Analytics:
o Investors leverage data from secondary transactions to inform investment strategies, assess market trends, and identify emerging opportunities.
o Sellers utilize insights provided by Investors to determine optimal selling times and pricing, maximizing their financial gains.
c. Relationship Building:
o Investors build relationships with Sellers to gain preferential access to future investment opportunities and insider insights into high-potential Issuers.
o Sellers establish connections with Investors to facilitate future transactions and maintain a network of potential buyers.

Overall Ecosystem Dynamics
a. Value Creation and Growth:
o Issuers grow and increase in valuation through investments from Investors, enhancing the value of equity held by Sellers.
o Investors benefit from the appreciation of their investments and the liquidity provided by Sellers, ensuring a healthy cycle of investment and return.
o Sellers realize financial gains through the sale of their equity, incentivizing continued participation and investment within the Hiive ecosystem.
b. Feedback Loops and Network Effects:
o Successful transactions between Investors and Sellers enhance platform credibility and attractiveness, drawing more Issuers and Investors to Hiive.
o Enhanced liquidity and diverse investment opportunities create a virtuous cycle, fostering sustained growth and a robust marketplace.
o Data-driven insights from Salesforce analytics inform strategic improvements, ensuring that Hiive continually meets the evolving needs of all user segments.
c. Synergistic Relationships:
o Issuers, Investors, and Sellers interact synergistically to create a thriving marketplace where capital flows efficiently, opportunities are maximized, and value is continuously generated.
o Salesforce acts as the central hub, facilitating seamless interactions, data sharing, and relationship management among all segments, thereby enhancing overall operational excellence and user satisfaction.


Q3: What Are the Relationships Among the Customer Groups and User Segments You’ve Provided?
Understanding the interconnections among Issuers, Investors, and Sellers is essential for fostering a dynamic and efficient ecosystem within Hiive’s platform. These relationships facilitate seamless capital flows, strategic partnerships, and value creation, ensuring the platform's growth and sustainability. Below is a comprehensive exploration of these relationships, aligned with the previously identified user segments.

1. Issuers ↔ Investors
a. Investment Flow:

Issuers (Early-Stage Startups, Growth-Stage Companies, Late-Stage Pre-IPO Companies) actively seek capital to fuel their growth, expand operations, enter new markets, or prepare for public offerings.
Investors (Institutional Investors, Accredited Individual Investors, Corporate Investors) provide the necessary funds in exchange for equity stakes, aiming for returns through company growth and eventual exit events such as IPOs or acquisitions.
b. Ongoing Engagement:

Issuers maintain robust relationships with Investors to secure continuous funding rounds, strategic guidance, and operational support.
Investors engage with Issuers to monitor performance, provide strategic advice, and influence operational decisions to enhance investment returns.
c. Value Creation:

Issuers benefit from the capital infusion and strategic expertise provided by Investors, enabling them to scale effectively and achieve their growth objectives.
Investors gain from the appreciation of their equity stakes as Issuers grow and increase in valuation, thereby enhancing their investment portfolios.
2. Issuers ↔ Sellers
a. Equity Management and Liquidity:

Sellers (Employees and Founders Holding Equity, Early-Stage Investors and Shareholders, Institutional Shareholders Seeking Liquidity) hold equity stakes in Issuers and may seek liquidity through secondary sales.
Issuers facilitate these secondary transactions by providing the necessary infrastructure and compliance frameworks, allowing Sellers to liquidate their holdings without disrupting the company’s equity structure.
b. Compliance and Oversight:

Issuers ensure that all share sales comply with regulatory requirements and internal policies, maintaining control over who can acquire additional shares.
Sellers rely on Issuers for transparent processes and support during liquidity events, ensuring that sales are conducted smoothly and compliantly.
c. Value Realization:

Sellers realize financial gains through the sale of their equity, incentivizing continued participation and investment within the Hiive ecosystem.
Issuers benefit from maintaining a motivated and financially secure team, as employee liquidity can enhance retention and satisfaction.
3. Investors ↔ Sellers
a. Secondary Market Transactions:

Investors participate in the secondary market by purchasing shares from Sellers, thereby diversifying their portfolios and accessing exclusive investment opportunities.
Sellers provide liquidity by offering their shares to Investors, enabling them to realize returns on their equity holdings.
b. Data and Analytics:

Investors leverage data from secondary transactions to inform investment strategies, assess market trends, and identify emerging opportunities.
Sellers utilize insights provided by Investors to determine optimal selling times and pricing, maximizing their financial gains.
c. Relationship Building:

Investors build relationships with Sellers to gain preferential access to future investment opportunities and insider insights into high-potential Issuers.
Sellers establish connections with Investors to facilitate future transactions and maintain a network of potential buyers.
4. Overall Ecosystem Dynamics
a. Value Creation and Growth:

Issuers grow and increase in valuation through investments from Investors, enhancing the value of equity held by Sellers.
Investors benefit from the appreciation of their investments and the liquidity provided by Sellers, ensuring a healthy cycle of investment and return.
Sellers realize financial gains through the sale of their equity, incentivizing continued participation and investment within the Hiive ecosystem.
b. Feedback Loops and Network Effects:

Successful transactions between Investors and Sellers enhance platform credibility and attractiveness, drawing more Issuers and Investors to Hiive.
Enhanced liquidity and diverse investment opportunities create a virtuous cycle, fostering sustained growth and a robust marketplace.
Data-driven insights from Salesforce analytics inform strategic improvements, ensuring that Hiive continually meets the evolving needs of all user segments.
c. Synergistic Relationships:

Issuers, Investors, and Sellers interact synergistically to create a thriving marketplace where capital flows efficiently, opportunities are maximized, and value is continuously generated.
Salesforce acts as the central hub, facilitating seamless interactions, data sharing, and relationship management among all segments, thereby enhancing overall operational excellence and user satisfaction.
Conclusion
The relationships among Issuers, Investors, and Sellers form the backbone of Hiive’s platform, creating a dynamic and synergistic ecosystem. By understanding and optimizing these interconnections, Hiive can ensure seamless capital flows, foster strategic partnerships, and drive sustained growth. Leveraging Salesforce’s robust capabilities to manage these relationships effectively will further enhance Hiive’s position as a leading marketplace in the venture-backed pre-IPO secondary market.