Stripe, a payments start-up, is one of the most successful companies to emerge from Silicon Valley in a generation. Last year, it hit a valuation of $65 billion. But in the 15 years since it was founded, there has not been a way for most individuals to invest in it.
It is a problem that has vexed retail investors for years, as start-ups like Stripe, SpaceX and OpenAI soar to enormous valuations in the private market. Only so-called accredited investors with a high net worth are allowed to invest in private tech start-ups. By the time the companies go public a decade or more after they started, their growth has often slowed and their valuations are high.
A new fund, Destiny Tech100, is trying to change that with a novel solution. It is offering a publicly traded fund that contains shares of 23 private tech companies including Stripe, SpaceX, OpenAI, Discord and Epic Games. The fund, which began trading on the New York Stock Exchange last week, plans to expand its holdings to include stock in 100 start-ups.
Sohail Prasad, the chief executive of Destiny XYZ, the parent company of the fund, said his goal was to let anyone own part of the tech industry’s top private companies.
“We have tens of thousands of individual investors that are now shareholders in these companies,” he said.
The fund is part of a convergence of the public and private markets that has accelerated in recent years, as investments in private “alternative assets” — including private equity, hedge funds and venture capital — become larger pieces of the overall investment landscape. Venture capital investments in private tech start-ups rose to $170 billion last year from $28 billion in 2009, according to PitchBook, which tracks start-ups.
Still, start-up investing is generally not available to most individuals. To qualify someone as an accredited investor, the Securities and Exchange Commission requires a net worth of $1 million or an annual income of $200,000 for the past two years.
Non-accredited investors can try to invest in private start-ups through interval funds, which only allow people to sell a portion of their holdings every quarter, or mutual funds, which dedicate just a tiny portion of their overall funds to private companies.
Mr. Prasad was a founder of Forge, one of the marketplaces for private tech stocks, in 2014. He said he started Destiny in 2020 to give people like his father, a management consultant in Texas, access to high-growth start-ups.
Mr. Prasad raised $100 million in funding from investors including a variety of start-up founders like Fred Ehrsam, a founder of Coinbase, a large cryptocurrency exchange; Charlie Cheever, a founder of the question-and-answer site Quora; and Heather Hasson, a founder of FIGS, a medical apparel provider.
Mr. Prasad and a team of five deal makers have used their relationships to get access to the start-up shares that Destiny has bought so far. Private companies can be picky about whom they let own their shares. But as they stay private for longer, their employees and early investors can become antsy to cash out. The most valuable companies have held regular “tender offers” that allow employees to sell their shares, which is one way Destiny Tech100 buys stock.
The fund has a market valuation of about $365 million. After the companies it has invested in sell or go public, the returns from those investments can be distributed to shareholders as a dividend or reinvested in the fund. Mr. Prasad said the fund planned to hold the stocks for a time after a company goes public. The fund charges an annual fee of 2.5 percent.
James Seyffart, a research analyst at Bloomberg Intelligence, said such a fund was the only way for many investors to get exposure to these companies, especially with smaller amounts of money.
“Even if you are accredited and can get into them, there are often very high minimums” needed to invest, he said.
The biggest risk to investors in the new fund is whether the price of the stock reflects the value of the underlying assets, he added.
The S.E.C. limits who can invest in private tech start-ups for a reason: Such investments can be risky. Private companies are not required to share information about their operations, and it can be difficult to assess their valuation. Many tech start-ups are also unprofitable.
The Destiny Tech100 fund has become available as investors have pulled back on many tech investments. (Companies that are focused on artificial intelligence remain in demand.) Instacart and Reddit, well-known consumer tech companies that recently went public, are trading below their last private valuations. Destiny Tech100 owns shares in Instacart, which it bought before the company went public.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
