Four months before Spotify went public in an unusual direct listing , $150 million of shares in the music streaming service were traded on a little-known startup called Equidate.
Equidate, a platform that helps startup employees sell their private equity, has picked up steam since its founding in 2014. As startups have started to stay private longer, employees and early investors have turned to the platform as a way to cash in on their equity.
On Wednesday, the company announced a new CEO to scale the company and expand its offerings internationally.
Kelly Rodriques, general partner at Operative Capital and an investor in Equidate, will take over the role of CEO from Equidate’s co-founders, Sohail Prasad and Samvit Ramadurgam. Prasad and Ramadurgam will stay on at Equidate as co-presidents.
“I looked all around the country for a firm that was in this space that had phenomenal technology and great talent, and that’s what led me to Equidate,” said Rodriques, who first met the founders two years ago, and later invested in the company when it fundraised a Series B.
The company raised $50 million in that round, announced at the end of July, which valued the company at $220 million, according to PitchBook. The round was led by Financial Technology Partners and Panorama Point Partners, as well as Rodriques’ firm, Operative Capital.
The funding and executive shift come at a time of growth at the startup. The company said its transaction volume has consistently grown 300% year-over-year, and that the company is already profitable. It currently has a run rate of $1 billion in transactions, 40% of which is sourced internationally.
Though Rodriques has focused on investing in recent years, it’s not his first time at the helm. He led the investment custodian company PENSCO for more than six years before its acquisition in 2017, and was CEO and chairman of the software company Totality before its acquisition in 2006.
Startups are staying private longer, so employees are stuck
Equidate aims to solve a growing problem in Silicon Valley. Venture-backed startups are staying private longer, which means employees with thousands — and sometimes millions — of dollars of compensation in equity are stuck without liquidity, or access to payment in cash.
Sure, equity in a company like Uber could be worth a lot more once it starts trading on the public markets. But it’s hard to buy a house or send your kids to college with shares of a 9-year-old company that was expected to go public two years ago.
Now, as companies find it increasingly strategic to stay private longer, they have started working with companies like Equidate directly. It’s almost like an employee benefit, Rodriques said.
“Previously it might have been a handful of employees or maybe a senior executive who wanted to sell. What you’re now starting to see beyond the onesie twosie sellers, you’re starting to see the companies themselves now organize a liquidity program,” he said.
Despite customer demand, the employee liquidity space is still pretty young. Equidate’s biggest competitor, according to Rodriques, is a startup called EquityZen, which works primarily with employees selling equity in smaller startups.
Equidate, however, focuses primarily on the top 200 largest private companies, he said.
The buyer pool is shifting too. Historically, Equidate has worked mainly with high net-worth investors. But increasingly, banks and institutions are drawn into the promise of private investments and see no reason to wait until shares are trading on the public markets at a higher valuation.
In theory, less wealthy individuals can also buy equity through Equidate, he said, but currently they have to do it through an accredited investor or be accredited themselves.
Down the line, however, Rodriques said he expects Equidate will release new products and features that put private equity in the hands of smaller investors as well.