Forge Global--a Thiel-backed startup that helps employees of private companies sell shares in a pre-IPO stock market--announced a new minority investment from French bank BNP Paribas on Wednesday. (The amount of the investment was not disclosed.) The move includes plans to raise a $1 billion fund through sales of derivatives linked to startup shares, which would be offered to both institutions and individuals.
Many startups are staying private for longer, and Lyft's post-IPO struggles could be a warning sign for others on the verge of going public. Businesses like Forge encourage people who work at those companies to cash out rather than waiting for a potentially bigger future payday.
That opportunity is a double-edged sword for employers and employees alike. Your business may be able to attract employees by promising the option of early liquidity--but your workers could simply take the money from selling their stock and quit their jobs. And employees might regret selling early if the company ultimately becomes a hit on the public market.
Forge, which was founded in 2014 under the name Equidate, is not the only company to facilitate such deals; competitors include SharesPost, EquityZen, and 2010 Inc. 5000 honoree SecondMarket (which has since merged with the NASDAQ Private Market). These types of exchanges garnered attention in 2015 when the U.S. Securities and Exchange Commission began an investigation into possible violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act.