Equity zen3/31/2023 ![]() ![]() The companies listed include well-known tech companies, many recognizable consumer brands. As of this writing, there were 16 open investments (with several only offering a wait list) as well as more than 20 preview investments offering prospective investors the opportunity to express interest. Breadth of offerings on EquityZenĮquityZen typically has a broad selection of open investments, though availability is dependent on willing sellers of private shares (and on the approval of the company as well). While some investors achieve excellent returns from startup investing, that is a rare outcome and requires substantial diversification over time combined with very careful investment selection. Investments in private companies can lose some or all of their value. ![]() Most of the investments have no explicit expectation of payments, dividends, or other cash flow. Investments via EquityZen are high-risk investments in private companies. There are no ongoing AUM fees or carried interest. How does EquityZen make money?ĮquityZen charges a one-time fee when you invest, from 3-5% of the invested amount (which is charged on top of the investment amount, so for example if you were to invest $50,000, you would end up transferring $52,500 to EquityZen). During the life of the SPE, investors will receive an annual K1 for tax purposes. If and when the company goes public, after a lockup period investors will receive actual shares in the company deposited into their brokerage account. What do you get when investing with EquityZen?Īlthough the seller is selling company stock, that stock is in turn held in special-purpose entity (SPE) LLC, and investors receive a membership interest in that LLC. In theory, given their operating history and track record, these companies are closer to IPO (or other liquidity event) than a typical startup investment. Investments are in late-stage companies, primarily tech businesses, including many that are household names (you must create an account and certify as an accredited investor to browse open offerings). Yes, EquityZen is “legit” in the sense that it is a legitimate, regulated business and a legitimate alternative investment opportunity for accredited investors.ĮquityZen is among a growing crop of crowdfunding and online alternative investment platforms, most of which have launched in the wake of the 2012 JOBS Act. Investments are offered under SEC Reg D and available only to accredited investors Is EquityZen legit? EquityZen matches sellers and buyers (although influenced heavily by the most recent financing round, the sale price is ultimately determined by the seller), and then coordinates all of the (substantial) paperwork and process associated with the transfer, which importantly is approved by the pre-IPO company itself. You can read more about the criteria we use to review investment platformsĮquityZen is not technically “crowdfunding”, but is an online alternative investment platform offering a secondary market to investors, advisers, and employees of startups who are looking to sell some or all of their stock. ![]() Including how the alternative investments on EquityZen are structured, and what your potential returns might be. This EquityZen Review will help you learn more about EquityZen's investment offerings, Startup investments are already inherently risky and illiquid, and additional uncertainty around cannabis industry adds to that risk.EquityZen charges up to 5% of the amount invested.Investments are not direct stock ownership (an SPE is used).Carta is a fintech startup that builds software for companies to manage their Cap Tables. Both platforms require you to be an Accredited Investor.Īnother platform that is really interesting is CartaX. The advantage is that shares can be bought and sold in the future with much less friction. The investments are structured as purchasing shares in an LLC that holds the particular stock that you are investing in. In some cases, direct sales are only permitted to Qualified Purchasers ($5M net worth).ĮquityZen has much lower minimums ($10k for first 2 investments, $20k afterwards) but the valuations that you are buying the secondaries at are usually a bit higher. One downside is that it is difficult to see which companies they currently have available. You can also specify the min and max share price (valuation) that you are looking to purchase at and types of shares (preferred or common). The preferred approach is a direct sale but they are also able to facilitate indirect sales through forward contracts, etc. They are more flexible on how the transactions are structured. The minimum investment size on their platform is $100k for most companies and up to $1M for select ones. Can only speak about my experience as a buyer on both.įorge Global is the largest broker in the secondaries market, they recently acquired SharesPost.
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