Startups

Startup secondaries market heats up, prompting Forge to seek own listing – PitchBook News & Analysis


As companies stay private for longer, founders and employees are increasingly looking to turn part of their shares into cash.

At the same time, investors of all sorts have an insatiable appetite for fast-growing venture-backed startups.

This dynamic is creating strong tailwinds for companies that facilitate trades between buyers and sellers of private shares.

And now Forge, an online marketplace for such secondary deals, has announced its plans to become the first publicly held platform dedicated to trading private companies. The San Francisco-based company intends to merge later this year or in early 2022 with a SPAC called Motive Capital in a deal that would value the company at $2 billion. 

Forge has raised more than $250 million in private funding, including a $150 million round in May. That deal, which was backed by investors such as Wells Fargo and Temasek, valued the company at $700 million, CNBC reported.

Companies whose pre-IPO shares traded on Forge’s platform include now-public Peloton, UiPath and Affirm, as well as still-private, highly-demanded unicorns Impossible Foods, Brex and Discord. Since its founding in 2014, Forge has brokered deals for about 400 private companies.

But Forge has competition. Among other players who help facilitate secondary transactions of private shares are EquityZen, Nasdaq Private Market and Carta, which last month raised $500 million at a valuation of $7.4 billion.

There are, however, notable differences between these companies. Unlike Forge, which is best known as a private-shares broker, Carta derives most of its revenue from selling cap table management software and valuation services.

“Carta’s aspirations of being the Nasdaq of private markets has not been great so far since Nasdaq is also in this space now,” said Scott Chou, co-founder of ESO Fund, a firm that takes stakes in startups through secondary deals purchasing employee options.

Nasdaq Private Markets, which was spun out of the stock market earlier this year, could itself be in a position to go public via a SPAC within a year, Chou said.

Nasdaq Private Markets did not respond to an immediate request for comment.

Since many startups are starting to offer liquidity options to their employees earlier in their life cycle, secondary markets for VC-backed company shares are likely to continue to grow. Similar to primary stock exchanges, there may be room for several marketplaces for the trading of private shares.

Featured image by wenmei Zhou/Getty Images.



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