There has recently been a flurry of activity in EMEA with both the London Stock Exchange (LSE) and the Johannesburg Stock Exchange (JSE) announcing their private market launches, whilst investing in platforms that facilitate this. This is not a new concept as the Nasdaq Private Market has been trading since 2015, but in what way will they be useful to technopreneurs?

The LSE announced in March 2022 a strategic investment and long term partnership with Floww, a platform that connects VC and Angel investors with private companies. It intends to attract participants globally and to facilitate both primary and secondary share offerings. The Floww platform already features 7,000 companies and 70 VC firms.

In an Emerging Markets version, the JSE  launched its Private Placements market in December 2021, together with a minority investment into Globacap, a UK-based capital markets issuance and settlement platform . The Globacap platform already manages over 80 companies and 4,300 investors. Appropriately as an Emerging Markets play, it is used for both debt and equity placement, with some of the first projects including infrastructure, renewable energy, student housing and even raising a VC fund. It hopes to attract players from the entire African continent.

How will these exchanges benefit technopreneurs? Will it be an easy way to raise early stage capital from VCs? Will they provide liquidity for employees and ex-employees of private tech companies? Is it a way to do a Pre-IPO round?

It is instructive to look at the Nasdaq Private Market (NPM), which boasts a transaction value of $41 billion, 550+ companies and 150,000+ participants. It is reasonably global with companies and investors beyond the US in Brazil, Mexico, Europe, Japan and Singapore. Some 55% of companies are $1 billion or greater with only 16% less than $250 million.

It is therefore not a place for technopreneurs to raise early stage capital. It will be interesting to see if the LSE market turns out to be any different – so far they seem to emphasize VC and Angel investors. The JSE will necessarily be more project debt based, with relatively few VCs in the African market.

The stock exchange-based private markets perhaps have an edge over independent private markets such as Equityzen in the US  and Orbitt for the African market in that they have a brand which is associated with trust and reliable data, which is at the heart of successful trading. The goal is to provide ongoing standardized performance data, but the challenge is being able to control who can see what data, which is necessarily private.

Equityzen positions itself as “the Marketplace for Pre-IPO Equity” and like the NPM is geared towards tech companies that are, or heading towards being unicorns, offering a  secondary market for liquidity. They seem to attract a global audience and boast 34,000+ investments serving 350+ companies.

Orbitt probably provides some clues as to where the JSE Private Placement market will play. It’s platform mostly matches debt transactions, especially trade finance, with little demand for the early stage technopreneur’s shares.

In current times with the loss of value in the listed tech market, and IPOs coming to a virtual standstill in 1Q2022, the exchanges catering to later stage tech company secondary sales through employee liquidity and institutional block sales of shares should expect to prosper.

Perhaps the LSE will become an exchange for startups globally to raise early stage capital? It would be great to have a silver bullet to solve one of the hardest activities a startup has to undertake – raising capital. It would be a first!

Further reading:

Private share marketplaces – One step beyond (Corniche Growth Advisors)

Creating personal liquidity by selling shares in your startup (Corniche Growth Advisors)