FinFair 2015 took place on July 29th at the IBM building in New York City. The event was a history lesson on the way private companies have traditionally raised capital through IPOs using networks of brokers. This was compared to emerging disruptive FinTech platforms providing technology-enabled ways to conduct offering access for brokers and investors on real estate and private company listings.
I was fascinated to hear that when Intel went public in 1971 they raised just under $7.5 million. The funds were sourced by dozens of underwriting brokers to raise the money it needed to grow into the microchip behemoth it is today. Contrast that to Alibaba’s recent IPO, through just a handful of underwriting brokers, raising $25 billion.
Intel’s IPO in 1971, valued at $58 million, was modest in those days, even factoring in inflation compared to today’s financial world. Alibaba’s IPO priced the company at $170 billion. For Alibaba’s IPO to be as successful as Intel’s (in price appreciation for investors purchasing at the IPO price), it would need be worth $460 trillion or 6 times the current world’s GDP.
Private companies going public today are typically less concerned about raising capital for growth and more about providing liquidity for their investors. Successful private companies are staying private longer and raising more and more private capital through VCs and private equity than ever before. This example is just one highlight of how private markets and capital raising have clearly changed.
I was fortunate to be selected to speak on the Next Generation of Broker-Dealers Panel about how WealthForge is leveraging its technology platform to perform due diligence, process and eventually distribute transactions in a better, faster, more efficient and compliant way.
For the first time, private capital is being raised via online platforms that allow investors to gain access to vetted opportunities, buy alternative assets and private stock before an IPO, as well as participate in wealth creation. Finfair was all about Wall Street beginning to discover the remarkable amount of financial innovation occurring in the alternatives space; much of which is emanating out of first generation marketplace lending and equity investment platforms. This is being made possible by a modern regulatory regime simplifying access to capital and private investment opportunities. We are still in the very early days of new technology-enabled private finance but things are moving fast. Stay tuned….
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