Today SeedInvest announced that we received FINRA approval to operate an Alternative Trading System (ATS) to facilitate secondary trading of startup investments. This is an important step towards our goal of democratizing the private capital markets.
When we first began to work on the Entrepreneur Access to Capital Act in 2011 (before it was called the JOBS Act), we envisioned a world in which everyone’s investment portfolio included startups. We were confident that millions of people would invest in startups for the first time and that, as a result, a vibrant secondary market would emerge to facilitate liquidity. It turns out, we were right that millions of people would invest in startups for the first time but were wrong about the secondary market.
Over seven years later, we feel as strongly as we did back then that a balanced portfolio should include alternatives such as startups and not just stocks and bonds. Some of the most sophisticated investors on the planet (pensions and endowments) have a significant portion of their portfolios invested in venture capital and we believe that ordinary people should have that opportunity as well. Through the passage of the JOBS Act, online platforms have been able to leverage the Internet to provide access, greater transparency and significantly lower investment minimums which has enabled easier diversification. But a lack of liquidity remains the biggest missing piece to getting startups in every portfolio.
The other day someone asked me why liquidity is so critical for startup investing and I provided two reasons. First off, for most people, investing in anything for the first time can be nerve wrecking. But if you invest in Apple stock, you can always change your mind the next day and sell it. If you invest in an early-stage startup on the other hand, you are often making a 5+ year decision and that’s tough for many people to swallow. Second, when you invest in a public company, there is an immediate feedback loop; you always know exactly how you are doing based on the stock price. When you invest in an early-stage startup, it’s often difficult to know how your investment is actually performing for months or sometimes years at a time.
A true vibrant secondary market for startups would address the aforementioned challenges and make investing in startups more attractive. In turn, this would result in more capital for the very startups which drive job growth and innovation in America and abroad. Once we formally launch our ATS, it should be a big win for entrepreneurs and investors alike. In the meantime, today marks a big milestone in our new journey as part of the Circle family.
Ryan M. Feit
CEO & Co-Founder
All securities-related activity is conducted by SI Securities, LLC dba SeedInvest, an affiliate of Circle Internet Financial Limited, and a registered broker-dealer, and member FINRA/SIPC, located at 116 W Houston Street, 6th Floor, New York, NY 10012. This communication is for information purposes only and should not be regarded as a recommendation of, or an offer to sell or as a solicitation of an offer to buy, any financial product. Investments are offered only via definitive transaction documents and any potential investor should read such documents carefully, including all risks, before investing. Startup investments involve a high degree of risk and those investors who cannot hold an investment for the long term (at least 5-7 years) or afford to lose their entire investment should not invest in startups. To learn more about investing in startups and its risks visit www.seedinvest.com/academy.
This post was written by Ryan on July 31, 2019
SeedInvest Receives FINRA Approval to Launch an Alternative Trading System