Whether public or private, illiquidity is a barrier to growth and efficient operation.
Increasingly, companies are looking to stay private for longer. As a result, a need for investor transparency, as well as the ability to transact and participate in the growth of businesses outside of secondary markets, has created demand for tools to enable liquidity optionality.
That’s why Graham McConnell co-founded Nth Round in 2018 to allow founders, shareholders and investors of private companies the tools to transparently trade their equity anytime, anywhere.
“A lot of private company investors are basically locked up in golden handcuffs, along with the executive team, waiting for some kind of liquidity event, like an IPO or an acquisition,” McConnell told Fintech Zoom.
“Our platform allows shareholders to trade amongst each other, or for the company to bring in new investors, and buyout some of the earlier participants.”
The Core Product: In the simplest way, Nth Round is a liquidity platform and investor portal, offering equity management tools for private companies, as well as funds and partnerships.
“The investor portal allows the company to post whatever they like — primarily quarterly updates on progress and their financials — which makes the life of the CFO a lot easier because they’re able to engage with investors, keep them up to speed, and then, when the time comes, they can provide them with an avenue toward liquidity.”
For a subscription that pales in comparison to the costs of going public, businesses can access Nth Round’s secure, mobile-friendly infrastructure for sharing information, managing capitalization tables, anonymous trading and automated fundraising.
“We work with the company to migrate any data that we need. So, the cap table is really the primary piece — so, who owns what — and then backfilling any financials.”
After collecting pertinent data, Nth Round will allow companies to onboard users.
“We send out invitations and use device authentication, rather than usernames and passwords,” the company’s co-founder said. “It’s highly secure. As soon as we have all the data and get everyone invited, then it’s a nice place to interact and talk about the company.”
Innovation Outlook: The pandemic was a tailwind for Nth Round, as its investor portal offers companies a new, streamlined way to engage with investors, McConnell said.
“With markets being at an all-time high and interest rates at an all-time low, investors are looking for places to create returns,” he said. “It’s a continuing trend, and I think all of those serve as a tailwind for those alternative markets.”
Going forward, Nth Round is focused on simplification and fundraising.
‘We’re getting ready to unveil a new feature for secure document storage and meeting materials,” McConnell said.
In regards to fundraising, he said the pandemic made it difficult for businesses to establish new relationships while maintaining operational secrecy.
“It’s a delicate process because you want to establish the relationship and make sure [investors] won’t disclose any information.”
In bridging the gap — allowing investors access to new opportunities and companies the ability to filter for specific fundraising participants — Nth Round is working on a new marketplace.
“Companies have a particular kind of investor they’re looking for and, on the flip side, there are investors that are looking for companies that are in their wheelhouse,” the co-founder said.
“By being able to filter and search through companies that have made the commitment to the kind of transparency our platform provides — suddenly, [your] private investments are starting to look like a portfolio through Nth Round’s platform.”
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