September 21, 2022

European Private Companies

Jake Safane

Despite macroeconomic and geopolitical headwinds, Europe continues to establish itself as a unicorn breeding ground. And with a notable shift toward late-stage funding, combined with challenging public market conditions, both investors and issuers are looking for ways to tap into this growth pre-IPO. In the recent Future Private webinar, Blythe Masters, Founding Partner at Motive Partners and an Independent Director at Forge, led a discussion of the dynamics around the European private market.

“If companies are growing to be worth a billion, $10 billion, $50 billion, you're minting a lot of wealth within the employee base. And that ride to going public does generate a point where liquidity is needed by hundreds, if not thousands of employees,” said Kelly Rodriques, CEO of Forge.

Top European private companies include such decacorns as Checkout.com, Revolut, Blockchain.com and Global Switch. For the complete list of $1 billion+ European private companies or unicorns, please visit our Private Market Update.

Typically, European startups have around 10% employee ownership, aside from founders, compared to 20%+ in the U.S., noted Christoph Hansmeyer, Managing Director, Deutsche Börse Group, and Independent Director at Forge.

But these cap tables could soon change. “I think this gap will close fast,” due to the “war for talent that we see today,” he added.

So, as companies look to provide employees with more stock and liquidity, that creates new opportunities for investors to potentially participate in Eurocorns’ and other private market companies’ upside.

“This is becoming a new asset class,” said Hansmeyer.

Whereas institutional investors might have accessed the private market through venture funds, “investing directly in late-stage, pre-IPO companies…is very interesting in terms of the return profile, the fee structure, etc.,” he added.

Yet analyzing and accessing this new asset class isn’t always straightforward.

“Clearly, Europe is not one country. It's a region of many countries. And that leads to a lot of complexity. But there is a big pipeline [of unicorns] here, and we believe there's a lot more to come over the next year,” said Hansmeyer.

Amidst this backdrop, Forge is expanding into Europe — in partnership with Deutsche Börse — to help startups and investors navigate trading of European private company shares.

“We believe that we've gone from a reactive market to a more proactive market. If a CEO and a board of directors are looking around at other companies and they're looking at the capital dynamics, both in terms of raising money and in providing liquidity programs formally, that environment has shifted significantly in the last few years,” said Rodriques.

So, one of Forge’s first offerings in Europe will be to help private companies create managed liquidity programs. Doing so will provide transparency and simplicity within the European private market that typically hasn’t been accessible before, which will benefit both buyers and sellers.

“There's really a chance for building a pan-European unified platform to trade private share capital,” with Forge and Deutsche Börse working together, said Hansmeyer.

Much of the private market interest comes from institutions, but there’s also a growing appetite among family offices, high-net-worth individuals and retail as a whole — both in Europe and elsewhere around the world — as finance becomes more democratized.

“Underlying that on a global basis is the rise of the middle classes with disposable income, seeking investment opportunity. And facilitating all of that is another trend, which is the digitization, the electronification of marketplaces,” said Blythe Masters.

Adding to this phenomenon, “wealth advisors around the world…are increasingly realizing that to be competitive, they need to have a complete offering of product that is not just their own manufactured product,” she added.

And by standardizing and centralizing private marketing trading through a platform like Forge, the market as a whole can benefit from increased visibility into private market valuations and investment activity.

“We think that a great private market is one that continues to expand globally, has the flexibility to build a big, world-changing business, but also has enough data about it to demonstrate that the valuations and the access to liquidity and investing is informed, because we all want to be confident in what we're doing, said Rodriques.

“That combination of disclosure and data transparency that we're putting out in our proprietary product really serves everybody's interest in the space,” he added.

To get more private market insights in Europe and around the world, you can see the full webinar replay here.

About Forge

Forge Global Holdings, Inc. (together with its subsidiaries, “Forge”) is a leading provider of marketplace infrastructure, data services and technology solutions for private market participants. By combining world-class trading technology and operating expertise, Forge Markets enables private company shareholders to trade private company shares with accredited investors. Forge Company Solutions, Forge Data and Forge Trust along with Forge Markets help provide additional transparency, access and solutions that companies, institutional and accredited investors need to confidently navigate and efficiently transact in the private markets. Securities-related services are offered through Forge Securities LLC (“Forge Securities”), a wholly-owned subsidiary of Forge. Forge Securities is a registered Broker Dealer and Member of FINRA/SIPC.

Legal Notices and Disclosures

Past performance is not indicative of future results.

The information and material presented in this article is provided for your informational purposes only and does not constitute an offer by Forge to sell, or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s), purchase agreement(s), and other applicable documentation, and will be subject to the terms and conditions and risks delivered in such documents.

This article does not constitute an offer to provide investment advice or service. Registered representatives of Forge Securities do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services. Securities referenced in this article may be offered by Forge Securities, and certain Forge affiliates may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involves a high degree of risk, and you should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

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About Forge

Forge Global Holdings, Inc. (together with its subsidiaries, “Forge”) is a leading provider of marketplace infrastructure, data services and technology solutions for private market participants. By combining world-class trading technology and operating expertise, Forge Markets enables private company shareholders to trade private company shares with accredited investors. Forge Company Solutions, Forge Data and Forge Trust along with Forge Markets help provide additional transparency, access and solutions that companies, institutional and accredited investors need to confidently navigate and efficiently transact in the private markets. Securities-related services are offered through Forge Securities LLC (“Forge Securities”), a wholly-owned subsidiary of Forge. Forge Securities is a registered Broker Dealer and Member of FINRA/SIPC.

Legal Notices and Disclosures

Past performance is not indicative of future results.

The information and material presented in this article is provided for your informational purposes only and does not constitute an offer by Forge to sell, or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s), purchase agreement(s), and other applicable documentation, and will be subject to the terms and conditions and risks delivered in such documents.

This article does not constitute an offer to provide investment advice or service. Registered representatives of Forge Securities do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services. Securities referenced in this article may be offered by Forge Securities, and certain Forge affiliates may act as principals in such transactions.

Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involves a high degree of risk, and you should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.