Democratizing Pre-IPO Investing In Technology Companies With EquityZen Co-Founder Atish Davda

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Despite the rise in the number of venture capital firms and startups in the last few years, very few people actually have access to the deals investors in the US and Silicon Valley have access to especially in the later stage of these fast-growing tech companies. With the goal of opening up access to these pre-IPO companies to a wider investment demographic, Atish Davda and his co-founders Shriram Bhashyam and Phil Haslett decided to start EquityZen, a platform that allows accredited investors to buy stock in private companies that are a few years away from going public—creating liquidity for employees of these private companies as well. Additionally, EquityZen allows people to invest as little as 20k in these pre-IPO companies.

Since Atish, and his friends Shriram and Phil founded EquityZen back in 2013, the company has grown to have over 20,000 accredited investors from over 40 countries, and over 10,000 shareholders on the platform. Additionally, EquityZen has conducted over 2500 private placement transactions with 80 large private companies, accomplishing all that with a current team of 20 employees. We got to sit down with Atish and talk more about how EquityZen was started and the early challenges and lessons he learned.

EquityZen Co-Founders Aitsh, Shriram and Phil
EquityZen Co-Founders Aitsh, Shriram and Phil

Solving a Personal Pain Point

For Atish, EquityZen was born out of a personal pain point he had when he decided to work in a startup and left with some equity in the company. He shared, “I was about to get engaged to this girl and wanted to buy an engagement ring. But what does my personal balance sheet look like? Well, I have these shares from these companies that are theoretically worth something but the jewelers were not going to take it [the shares].”

So Atish went ahead and called his friends Shriram and Phil, and the 3 friends got together to start thinking about how they could turn monopoly money into real money. With the initial concept in mind, Atish and his team went ahead and started talking to dozens of shareholders and investors to validate their idea.

He shared, “After we determined that there seemed to be a business need here, we were excited because we got the finance, legal and tech part covered given my background in tech, Shri’s background in law and Phil’s background in finance.”

Early Challenges

While investing in pre-IPO companies wasn’t a foreign concept, there were a lot of legal, financial and technical challenges Atish and his team needed to overcome early on to make this work.

Atish share, “I think one of the biggest challenges probably was the fact that we all had experience with the public side of finance, and public markets have had over 100 years to evolve while private markets, especially in this late stage venture world, the landscape has only really started to change in the last 10 years.”

He added how in the late 90s, companies like Amazon and Ebay were founded and 4 years later went public but today companies are staying private well into their teenage years and the bar of what it takes to go public is higher now so it takes them longer to go public.

Convincing first few sellers & buyers

Atish shared, “I’m not going to say it was easy but it definitely was not as hard as we thought. The biggest reason was objectively, we weren’t saying anything crazy. All we were saying was that if you had 20k to sell or buy, this already happens. There’s not legal question and there’s already proof and evidence in the last 50 years of people investing in late stage companies.”

For the EquitZen team early on, the biggest challenge was on the company side and trying to get them to trust the team. He shared, “They don’t know who you are. You don’t have grey hair, you don’t have Goldman Sachs in your business card or 20 years in the industry but after we had a chance to have a conversation with them directly and demonstrated that we had thought through things and we weren’t just trying to move fast and break things, we were able to gain their trust.”

Getting this very first company and very first transaction took EquityZen 6 months but it has been a bit more smooth sailing since then. Atish shared, “Obviously, 6 months is a pretty meaningful amount of time but it was worth the investment. In the last quarter, we did a transaction for every single hour that the company was open so I think we have come a long way from taking 6 months to do one transaction.”

EquityZen gives employees in these pre-IPO companies a chance to liquidate
EquityZen gives employees in these pre-IPO companies a chance to liquidate

Finding The Right Employees

Even if Atish and his team find the business of EquityZen very interesting, he understand that for most people, this type of fintech business is relatively boring—which for Atish, is actually a good thing.

He shared, “By building something that most people find boring, two great things happen: There’s not a lot of competitors who want to take on this boring and very difficult challenge given all the regulatory things you have to be concerned about. The second thing, the people interested and who applied to join our team, already passed the first screen in that they also found this relatively boring topic extremely interesting so there was really good selection bias that we will continue to benefit from [when hiring].”

He added, “It’s really tempting to just bring a bunch of people to the organization and say go go go just because there’s a long list of things to do and people to go to but taking it slow and bringing the right people to the team has been extremely rewarding and we want to continue doing that.”

Advice To Aspiring Founders

The biggest advice Atish had for aspiring founders was to remain focused on the vision of what you’re building. He shared, “It is kind of easy to get whipped plashed talking to advisor, investors and even clients but you really need to remain focused on the vision of what you’re building. If you have to take a slight detour, that’s okay but try to quickly get it back to track.”

Additionally, while Y Combinator Founder Paul Graham has said that, ‘companies fail because they run out of money’, Atish disagrees and believes that companies end up failing because they run out of time. He added, “It’s a lot easier to raise money to operate but it’s a lot harder to get the last 6 months back. Protect your time and don’t get yourself distracted by a new shiny thing that calls you now then 3 months later realize that it has just as many problems.”

You can learn more about EquityZen here.

EquityZen’s mission: Building private markets for the public
EquityZen’s mission: Building private markets for the public

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About the Author: David is a senior at Penn studying Cognitive Science and Computer Science, originally from the Philippines. At Penn, he’s heavily involved in the startup scene as an investment partner at Dorm Room Fund. Currently, he’s working on SkillStackers, the easiest way to scale work using a virtual workforce. Previously, he started a nonprofit organization called YouthHack which has gone on to scale to do programs in over 8 countries in the last 3 years. David enjoys meeting new people and sharing the stories of exceptional entrepreneurs!

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