
Equidate's new stock market for private tech offers in-depth data on startups - sohailprasad
http://nytimes.com/2016/07/26/technology/making-start-ups-financial-data-free-and-open.html
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twinkletwinkle
Anyone remember Sandhill Exchange, and how badly they got slapped around by
the SEC? I'd steer clear of this sort of thing until further notice.

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sohailprasad
Hi there, co-founder of Equidate here, happy to answer any questions you have.

We're well aware of Sandhill Exchange — they were akin to a prediction market
— we're a market where employees and investors who own shares are able to get
liquidity, and accredited investors are able to invest.

We've worked with our primary outside counsel, Lowenstein Sandler (an
internationally-prominent securities law firm), to ensure our compliance with
all regulation. As the article mentions, we've discussed Equidate with
regulators since 2014, and this past January FINRA approved our purchase of a
broker-dealer.

Finally, we've gone above and beyond to make sure our customers are protected.
We have an exclusive underwriting agreement and insurance policy with Munich
Re, the world's largest reinsurance company, to protect our investors from
fraud.

It's very rare for a startup our size to have a full-time Chief Legal Officer
& Chief Compliance Officer, and it's a testament to our efforts to get this
right.

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vadym909
Can you explain in plain English what 'insider' information you publish and
how you allow trading in private companies when this clearly is not possible
elsewhere. And if it is possible why don't these companies just IPO.

~~~
sohailprasad
Sure thing. We share information about companies' stock prices, share counts,
and valuations — data that has historically unavailable, inaccurate, and/or
very expensive (tens to hundreds of thousands of dollars per year). We show
you real-time news about these companies, and let you track the value of your
portfolio if you're an investor or employee.

We've built tools to use this data:
[https://equidateinc.com/browse](https://equidateinc.com/browse) Without even
signing up, you can answer questions like: "Show me Series B/C companies that
have raised $10-100M, have a valuation of $100M-$1B, have less than 200
employees, with a B2B business model in the Transportation industry." We think
that's awesome — whether you're an investor looking for investment
opportunities, an employee looking for a new job, or a just doing research on
companies, it can be incredibly powerful for the entire ecosystem to have
access to this data and the tools to use it.

Companies don't IPO for a variety of reasons. Going public is a source of
financing for companies — in recent years, with hedge funds and private equity
firms participating in Series B/C/Ds++, there is a lot more capital available
in the private market. New regulation has made it far more expensive to go
public and to stay public. Going public is arduous on the company from the
perspective of the time and attention it takes from management. And finally,
once a company is public, they are subject to the whims of the market and have
to answer to new investors who have a short-term focus on quarter-to-quarter
earnings, often at the cost of not being able to have full autonomy to execute
on their long-term vision.

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bear_south
went to site and got an im like this.. soahil prasad see you here so hopefully
you can explain. Feels extremely shady. Obviously you are not letting me
insantly make a 2500% return, but your instant help message says this... what
kind of gimic? (or was system hacked... trying to give you benefit of the
doubt!)

Equidate's Pre-IPO Promotion: Get access to FB at $4.54!

Hi there, thanks for checking out Equidate!

We're incredibly excited about giving the world early access to high growth
private tech companies. To show you what we mean, we're giving you a second
chance to get in early on two of the world's most successful companies —
Facebook and Tesla — at their pre-IPO prices!

Sign up here to get in on Facebook at $4.54 (the price at its Series E in May
2009 where DST Global invested $200M) instead of its recent price of over
$115.

You can share the following link with your friends!
[https://early.equidateinc.com/](https://early.equidateinc.com/)

~~~
sohailprasad
We're running a promotional event called the Early Is Everything Pre-IPO
Pricing Event this Thursday (7/28) and next (8/4) to celebrate the launch of
our new trading platform.

We'll be giving over 100 people the opportunity to get in early on Facebook
($4.54) and Tesla ($2.97).

As per the Event FAQ on the linked site, we're taking a loss on every
certificate to prove a point — that when it comes to investing in the most
successful companies in the world, early is everything.

The "Early is Everything" promotion offers eligible participants the
opportunity to purchase a certificate at the pre-IPO price of either Facebook
or Tesla Motors, redeemable for securities through a registered broker-dealer,
or for merchandise, at the current price of these companies as of July 13,
2016. Offer good while supplies last. Other terms and restrictions apply,
please see event page for full details. See:
[https://early.equidateinc.com/](https://early.equidateinc.com/)

~~~
bear_south
to make explict, does each person get 1 share? so about 110 profit facebook
and then 225 profit for tesla. As you can see from my profile i don't comment
a lot here, but felt compelled as i personally was put off by the spammy
nature.

YMMV.

Just friendly advice and also caution to others I guess. For a site that talks
about having institutional investors and having one of the top legal firms in
the world this mlm and internet riches type vibe is what I got. Again, you
guys may be great, but this is very unprofessional / gimmicky in my opinion

~~~
sohailprasad
The goal of the campaign is to drive awareness among individual investors and
employees, and we're doing so by contrasting the opportunities of today with
opportunities in successful companies of the past. We've gotten a great
response so far, but thanks for your candid feedback.

Each person is limited to one certificate. The certificate is redeemable
either for securities (i.e. a share of Facebook at its closing price as of
July 13, 2016) through a broker-dealer for those who setup an account, or else
for merchandise. It's structured like this specifically to ensure that we're
compliant with relevant regulation.

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thomasdub
Would you consider adding some of the startup valuations from different mutual
funds to add context to the valuations? Your latest valuation for DropBox is
$19.10 but various mutual funds have valued them between $9.75 and $12.30 in
Q2 2016 [0]. I think it would add context and be useful for buyers and sellers
- I'm not sure anyone would buy DropBox for $19.10 today, and it's giving
employees with options false hope that they would get that amount. [0]
[http://graphics.wsj.com/tech-startup-stocks-to-
watch/](http://graphics.wsj.com/tech-startup-stocks-to-watch/)

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Dr_tldr
So this is either a glorified bucket shop or yet another company with the
brilliant idea of setting up an unregulated secondary market selling an
incredibly wide variety of different ownership instruments that were never
intended to be sold.

IANAL, but if I was their counsel, I would definitely advise them to keep
paying me a lot of money for a 10% chance it somehow works out with the
regulators.

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YuriNiyazov
How is this possible if most employee stock has right of first refusal built-
in?

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cloudjacker
That's for transferring, the sale only. And the lack of transparency means we
also don't know if "most" is really like that, no matter how standard your CEO
said it was.

The three startups you worked for probably share some venture capital firm or
related board member that copy and pasted the equity contract

But it didn't mean, necessarily, that condition is so prevalent or that much
of a roadblock

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YuriNiyazov
Dude. Bro. I advise other people on their stock grants, and see this all the
time. Thanks for assuming I'm just a schlob.

~~~
gilbug
Hi, company lawyer here. Sorry if that sounded dismissive. You're completely
right that there's a right of first refusal built somewhere into most stock
issuances to team members. They vary in who holds the right, the range of
transactions that trigger the right, exceptions to the right, and how it
operates. Accordingly, we look at the paperwork for each company and each
shareholder in order to structure a transaction that works, if possible.

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serge2k
How does a market that lets people buy and sell shares without the company
going public not get immediately slapped around by the SEC?

This all just feels wrong to me. As an employee selling shares how can I be
sure I'm not getting screwed over by anyone? The entire thing just seems
shady.

~~~
gilbug
As the company's in-house lawyer, I see that people who have a lot of stock
have generally hired a wealth manager, financial advisor, or personal lawyer
who advises them on transactions, or learn through colleagues who have done
so. Some lawyers specialize in employee equity, or private transactions more
generally. Shares of stock can be bought and sold like other financial assets,
subject to any regulations and contract obligations that apply. That's a
definitional attribute of stock and other securities. Public markets are a
layer on top of that, not something fundamentally different. Employee
shareholders who are not directors, officers, or 10% owners generally fall
under a 4(a)(1) exemption from registration. There are a bunch of online
resources on the topic, for example [http://securities-law-
blog.com/2015/06/23/section-4a1-4a1%C2...](http://securities-law-
blog.com/2015/06/23/section-4a1-4a1%C2%BD-exemption-recommendations-amendment-
rule-144-related-shell-companies/) (no connection and not an endorsement, the
site just looks helpful).

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formula1
A mentor of mine told me this is a legal nightmare. I imagine if there is
enough demand the state will be forced to adapt to the market. But this kind
of probably will go through some growing pains

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aphextron
"a market for trading shares of private companies"

So... the stock market? How can this possibly be legal?

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neals
So what happens if the company goes public?

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kriro
Could I sell Equidate options on Equidate?

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gilbug
CLO-dude here. Hmm. We are still fine-tuning the option plan so for now as a
technical matter, no.

When we do flip that switch, I expect that we will offer our optionees, like
other team members, early investors, advisors, and other shareholders at least
as much liquidity as we expect out of the rest of the industry. All of our
stock agreements to date contemplate secondary liquidity. We might have to do
that via third parties — I haven't thought through the implications of trading
Equidate shares on Equidate. It sounds like a Malkovich moment.

