PrivateEquity.biz, an Israeli start-up, aims to help people who have shares in start-ups realize their “exit dream” by providing a platform for them to sell shares in companies that are not yet publicly traded. The firm is the world’s first marketplace dedicated to facilitating the transfer of ownership interests between individuals who own shares in early-stage start-ups and want out, to those who see a good start-up opportunity and want in, said CEO Oren Harel.
One way cash-strapped start-ups acquire goods and services is by signing over a portion of themselves to suppliers. For example, many start-ups are incorporated and owned by the programmers who built the application, service or platform. When they want someone business-savvy to push their project to customers or investors, they hire an external CEO or business director, often “paying” them with shares in the company.
Sometimes, things don’t work out. Many former CEOs or workers who have had a falling out with their former employers often just want to put the experience behind them and get rid of their interest in the company, said Harel. “They’re the kind of people who would want to use a service like ours,” he said, as would other ex-employees, service providers or angel investors with shares who would rather cash in immediately instead of waiting for a start-up to germinate and grow.
Just as there are those who wish to sell, said Harel, there are those investors who are interested in buying and taking a chance on an early-stage start-up. “We don’t get involved in the deals at all,” said Harel of PrivateEquity.biz’s activities. “We try to match sellers and buyers, and let them do the negotiating themselves.” With that, he said, the site does due diligence on the companies with shares for sale in order to ensure that they are legitimate, with real offices and technologies that have at least some potential value. PrivateEquity.biz gets a commission when a sale takes place.
It’s all perfectly legal, said Harel, a lawyer with a background in investments and corporate law. “According to Israeli law, you can offer a deal like this to up to 35 people, and we have a mechanism to ensure that we operate within the law,” he said, adding that PrivateEquity.biz plans to set up sites for investors in several other countries, including Germany and several Asian countries, that will comply with the laws in those countries. Investments — sales and purchases — require a $10,000 (NIS 35,000) minimum to get listed on the site.
The idea is a more direct form of crowdfunding, in which large groups of investors pool their money in a fund to invest in start-ups, said Harel. “In crowdfunding, you invest your $10,000 in a fund which is managed by a professional, and may spread your investment around several companies, like any mutual fund. With our platform you are investing directly in a company, as a principal, which you might prefer to do if you really believe in the company and its technology.”
A US site called SharePost has a similar business model, but works mostly with later-stage start-ups, with Harel’s the only one welcoming early-stage companies as well.
The presence of shares for sale on his site has nothing to do with the quality, integrity or prospects of a company, said Harel. “The people we work with are not looking to ‘dump’ shares in companies that are dying. People have many reasons, personal and professional, for selling shares even in companies that have good prospects. We even have parents whose kids got shares in a start-up for their bar mitzva looking to sell, because the kid wants a more kid-oriented gift. The fact that we are willing to list them means that they have gone through some minimal due diligence, and they are at least what they represent themselves to be.”
Registering at PrivateEquity.biz is free. For those looking for the “next big thing,” the site offers an inside look at the technologies of tomorrow. Could a buyer get in on the next Waze or Viber? Could be, said Harel, adding “if you figure out which one it is, please let me know as well.”