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Private-Shares Brokerage InvestX Raises Capital From Jefferies, Virtu, and Canaccord

The deal comes during a surge of investor interest in pre-IPO companies.

InvestX, a platform that helps wealth managers buy and sell shares of private last-stage companies, or invest in them through its own funds, has raised a new round of capital from Jefferies Financial Group, Virtu Financial, and Canaccord Genuity Group.

Investment bank Jefferies and high-speed trading firm Virtu led the round. Canaccord, a Vancouver-based investment bank, was the only other participant. All three are new investors in the private share platform, a spokesperson for InvestX said. 

Few details and no terms of the deal were disclosed in a statement about it Wednesday. InvestX declined to share how much money it raised or what the company was valued.

Doug Cifu, CEO of Virtu, and Kieran Mara, vice president of Jefferies’ merchant bank, will join the InvestX board.

InvestX, a Vancouver-based company founded in 2014, has raised a little less than $7.8 million in two prior rounds, InvestX CEO Marcus New told RIA Intel. Previous investors include venture capital firms, angel investors, a hedge fund, and a family office, according to PitchBook, a data company focused on venture capital, private equity, and mergers and acquisitions.

The last time InvestX raised capital was June of 2019, when it raised about $1.65 million from an undisclosed group of investors, according to PitchBook.

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New said the latest round of capital was “significantly more” than the almost $7.8 million it had raised so far, but he declined to share the dollar amount.

The funding from Jefferies, Virtu, and Canaccord will be used to improve the InvestX platform, increase back-office integrations with wealth managers, and hire more employees. New said the partnerships with the new investors will also help InvestX build a better product and user experience.

The deal was announced on the heels of news that one InvestX competitor is going public and another is exploring a sale.

Last week, Forge Global, another online marketplace where private shares trade, announced they were going public by merging with Motive Capital Corp, a special-purpose acquisition company (SPAC), in a deal valued at $2 billion

In August, Bloomberg reported that EquityZen, another trading platform for shares in private companies, had hired a financial advisor and was exploring strategic options, including a possible sale for more than $700 million.

This past summer, Citi, Goldman Sachs, Morgan Stanley, Silicon Valley Bank, and Nasdaq Private Market announced a joint venture to create a secondary trading platform for issuers, brokers, shareholders, and prospective investors to trade in private company stock.

A number of innovations and changes to regulations over the past decade have contributed to the growth of the industry.

Before 2016, the SEC required companies with more than 500 non-accredited investors to go public. Then, as part of amendments to Jumpstart Our Business Startups (JOBS) and Title LXXXV of the Fixing America’s Surface Transportation (FAST) Act, congress raised the shareholder limit to 2000. This meant that companies could stay private longer and still access large amounts of capital without needing to disclose their financials to investors. As a result, there are more privates shares and opportunities to trade them.

“It's a roughly $3 trillion asset class today which literally didn't exist 10 years ago,” New said.

Explosive growth in the tech industry, increasing visibility of those companies in the public, and better trading platforms have made buying and selling shares of Impossible Foods, Kraken, 23andMe, SpaceX, and other private companies more accessible. Historically, only employees, institutions and the wealthiest investors dealt in private shares.

“We thought that was fundamentally unfair and so there had to be a way for other people to participate [on] a much broader basis, which is why we started the organization,” New said.

RIAs and other wealth managers are an important way for companies like InvestX to connect with investors.

“The RIA market, especially, has very little capability,” New said. “You have this mainstream asset class today, that still the RIA firms cannot get access to, right? They don't have the teams to be able to assess the products well, they don't have the ability to get the information, they don't have the ability to actually get access and price discovery and all those things. And so, we've really set up to help that group of customers be able to access it.”

Other companies have built or are developing platforms to help RIAs get their clients better access to early stage companies (which have eluded most RIAs). In July, A top neurosurgeon, a cardiologist-turned-serial entrepreneur, and three high-profile wealth management executives started a venture capital firm and are simultaneously developing a platform to make venture capital investments easier for RIAs.

Holly Deaton (@HollyLDeaton) is a staff writer at RIA Intel and based in New York City.

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