 "Tensions rise in US-based Silicon Valley over sales of startup stocks")
By Erin Griffith
Sohail Prasad, an entrepreneur, launched a fund in March called the Destiny Tech100. The fund owns shares in hot tech startups like the payments firm Stripe, the rocket maker SpaceX and the artificial intelligence company OpenAI.
Few people get the chance to invest in these privately held companies since their shares are not openly traded. Prasad’s intention with Destiny was to let the rest of the world get a piece of them through his fund.
But soon after Destiny debuted, two tech startups — Stripe and Plaid, a banking service — said the fund did not legally own their shares. Robinhood, the stock trading app, stopped letting investors buy into the fund, saying it had been added to its app by mistake.
Tensions over the shadowy and often enigmatic market of private company stocks have reached a boiling point, just as the buying and selling of such shares has grown bigger than ever. At its center is an age-old debate: Should everyone have access to the riches and risks of investing in Silicon Valley startups?
The market for private company stocks, also known as the secondary market, is on track to hit a record $64 billion this year, up 40 percent from last year, according to Sacra, a research firm focused on private investments. A decade ago, the private company stock market was roughly $16 billion, according to Industry Ventures, a firm focused on secondary transactions.
As the appetite for private company shares has soared, so have the headaches. If a company is publicly traded, like Apple or Amazon, anyone can easily buy and sell its stock. But privately owned tech startups like Stripe typically have a small circle of owners, such as their founders and employees, as well as the wealthy individuals and venture capital firms that provided financing for the companies to grow. The companies’ stocks do not usually change hands.
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Now, as these startups mature and don’t appear to be in a rush to go public, a wider range of investors are becoming eager to own their stock. New online marketplaces that match sellers of start-up stock with interested buyers have sprung up.
And funds like Destiny have appeared. Destiny is among the only options for retail investors, since most other funds and marketplaces are restricted to “accredited” investors with high incomes or net worth.
The activity has increasingly rattled some startups, which have long resisted letting their shares freely change hands. The more people who own their stock, the more unwieldy the number of shareholders, which can lead to difficulties complying with securities laws, among other complications. While some startups are allowing some trading of their stock, other trades are happening without permission.
‘Hey, I own some SpaceX’
Among the online marketplaces for buying and selling private company stocks is Hiive, which started in 2022. It is currently offering shares in Anthropic, a hot artificial intelligence start-up.
Hiive bought $50 million of Anthropic stock and is letting investors buy chunks as small as $25,000, said Sim Desai, the company’s chief executive. The site oversees an average of around $20 million in deals a week.
At Augment, which opened last year, investors interested in owning shares in Stripe can peruse four “sell orders,” or people trying to sell Stripe shares. Augment did more than $20 million of transactions in March.
Some investment funds — including Stack Capital, Fundrise, Private Shares Fund and ARK Invest’s ARK Venture Fund — are also pitching the ability to own a piece of private startups.
Destiny, which trades on the New York Stock Exchange and contains shares in 23 startups worth around $53 million, is one of a few options that are publicly traded.
The activity has alarmed some startups. Stripe, valued at $65 billion in the private market, has issued a strongly worded statement about offers to buy its stock. Any offer to invest in its shares that does not come from the company is “very likely a scam,” it said. Stripe has encouraged shareholders to report such offers to law enforcement.
Stripe and Anthropic declined to comment for this article.
Even so, people remain eager to get shares of the startups, said Jeff Parks, chief executive of Stack Capital, which offers investors access to companies including SpaceX and Canva.
“You want to be on the golf course like, ‘Hey, I own some SpaceX,’” he said.
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