VOI Technology, the e-scooter startup from Sweden, raises $50M led by Balderton Capital

VOI Technology, an e-scooter startup headquartered in Sweden but with pan-European ambitions, has raised $50 million in Series A funding, confirming our earlier scoop. As I previously reported, London-based venture capital firm Balderton Capital has led the round, alongside LocalGlobe, Raine Ventures, and previous VOI backer Vostok New Ventures.

A number of angel investors also participated. They include Cristina Stenbeck, Jeff Wilkes (Amazon), Justin Mateen (co-founder of Tinder), Nicolas Brusson (CEO and co-founder of BlaBlaCar), Sebastian Knutsson (co-founder of King), Spencer Rascoff (CEO of Zillow), and Keith Richman.

A source with knowledge of VOI’s early fundraising tells me this is in actual fact two rounds effectively being announced at the same time, although both VOI and Balderton say this is not the case. The e-scooter startup had previously raised around $3 million earlier this year.

What I do know, however, is the size of this new round got increased significantly very late on as VOI continues to gain early traction and the round became more competitive with a lot of VC interest. According to my sources, the initial target was $15 million at a pre-money valuation of between $35-40 million. Unfortunately, I haven’t been able to confirm the new valuation based on this much larger fundraise. Both VOI and Balderton declined to comment.

Launched in Sweden’s Stockholm in August 2018 by founders Fredrik Hjelm, Douglas Stark, Adam Jafer and Filip Lindvall, VOI has since expanded to Madrid, Zaragoza and Malaga in Spain. The plan is to use the new funding to continue to expand into new European markets. Belgium, the Netherlands, Luxembourg, France, Germany, Italy, Norway, and Portugal are said to be launching “in the coming months”. The VOI jobs page reveals that VOI is recruiting country managers for Denmark, Switzerland, Greece, Turkey, and Finland, too.

Like other e-scooter startups, VOI pitches itself as a way to ease traffic-clogged city centres and reduce pollution, with VOI’s scooters offering a “clean, efficient, cost-effective and zero emission” first-and-last-mile alternative to cars and taxis. After downloading the VOI app, you simply locate a nearby scooter on the street or via the app’s map, press the ‘ride’ button, scan the VOI QR code, and ride anywhere in the city. The company charges a €1 unlocking fee and a ride costs €0.15 per minute.

In just 12 weeks, VOI claims to have garnered 120,000 users, who have taken 200,000 rides, travelling 350,000 kilometres. It says this makes VOI Europe’s leading e-scooter sharing company.

“We see that we’ve changed user behaviour drastically in a very short time period,” VOI CEO Fredrik Hjelm tells me. “We changed how people commute, people move themselves. We changed how people transport within cities almost instantly after they try the scooters for the first time”.

He says this has resulted in “very strong retention rates, recurring use, and also friend referrals”.

“I’m from up in the North in Sweden, and for me it’s very difficult to understand, and it’s absurd, why we have so many cars and why our cities are built for cars, taxes and trucks, and not for people, animals, scooters, bikes, and light electric vehicles,” explains Hjelm. “That’s more from an ideological perspective. For me, scooters power freedom”.

VOI is also talking up its “distinctive” European approach in the way the company works collaboratively with city authorities. This is very different to the ‘ask for forgiveness not permission’ mentality of Silicon Valley.

“When you are reading the news, you get the feeling that city politicians are against scooters. The reality is the other way around,” Hjelm says. “The only thing is that they want a say in this and how it should be operated, so we don’t end up in a scooter graveyard situation that we see in some U.S. cities… Pretty much every European city has some kind of ambition or vision to become less dependent on fossil fuel driven cars and other vehicles”.

Balderton’s entrance into the e-scooter market comes after three of the other “big four” London VC firms have already made U.S. investments in the space. Index and Accel have backed Bird, and Atomico has backed Lime.

Last month also saw Berlin’s Tier raise €25 million in Series A funding led by Northzone, in another attempt to create the “Bird or Lime of Europe,” even if it is far from clear that Bird or Lime won’t take that title for themselves (which is obviously the bet being made by Index, Accel and Atomico). And two month’s ago Taxify also announced its intention to do e-scooter rentals under the brand Bolt, first launched in Paris but also planning to be pan-European.

This has led some VCs to describe the e-scooter space in Europe as a venture capital “blood bath” waiting to happen. The thinking is that the market has become so competitive so early, a lot of VC dollars are going to be spent (and potentially wasted) before it is far from clear who will be the eventual winner. That feels quite unusual for Europe, where it is more common for competing VCs to back off or co-invest once one or two of the big firms (or Rocket Internet) have made their move or when there is a better-funded U.S. competitor on the horizon — a point I put to Balderton Partner Lars Fjeldsoe-Nielsen.

“Yeah, and I think if we kept doing that as a VC community, we would never see any billion dollar companies coming out of Europe,” he replies. “This is why we’re backing VOI. [But] I get your point: it’s up against large amounts of capital”.

Describing e-scooters as a massive opportunity to change that, Fjeldsoe-Nielsen says that in the last four weeks VOI has doubled it revenues and that Balderton is seeing the same kind of traction and market reaction as Bird and Lime in the U.S.

“We believe an equally big company can come out of Europe,” he adds.

Gillmor Gang: Nation State

The Gillmor Gang — Keith Teare, Esteban Kolsky, Frank Radice, Michael Markman, and Steve Gillmor . Recorded live Saturday November 17, 2018. Democracy saved, fiat currency, and Facebook rope-a-dope.

Produced and directed by Tina Chase Gillmor @tinagillmor

@kteare, @ekolsky, @fradice, @mickeleh, @stevegillmor

Liner Notes

Live chat stream

The Gillmor Gang on Facebook

The slow corrosion of techno-optimism

Two weeks from now, the Swahilipot Hub, a hackerspace / makerspace / center for techies and artists in Mombasa, Kenya, is hosting a Pwani Innovation Week, “to stimulate the innovation ecosystem in the Pwani Region.” Some of its organizers showed me around Mombasa’s cable landing site some years ago; they’re impressive people. The idea of the Hub and its forthcoming event fills me with unleavened enthusiasm, and optimism … and a bleak realization that it’s been a while since I’ve felt this way about a tech initiative.

What happened? How did we go from predictions that the tech industry would replace the hidebound status quo with a new democratized openness, power to the people, now that we all carry a networked supercomputer in our pocket … to widespread, metastasizing accusations of abuse of power? To cite just a few recent examples: Facebook being associated with genocide and weaponized disinformation; Google with sexual harassment and nonconsensual use of patients’ medical data; and Amazon’s search for a new headquarters called “shameful — it should be illegal” by The Atlantic.

To an extent some of this was inevitable. The more powerful you become, the less publicly acceptable it is to throw your increasing weight around like Amazon has done. I’m sure that to Google, subsuming DeepMind is a natural, inevitable corporate progression, a mere structural reshuffling, and it’s not their fault that the medical providers they’re working with never got explicit consent from their patients to share the provided data. Facebook didn’t know it was going to be a breeding ground for massive disinformation campaigns; it was, and remains, a colossal social experiment in which we are all participating, despite the growing impression that its negatives may outweigh its positives. And at both the individual and corporate levels, as a company grows more powerful, “power corrupts” remains an inescapable truism.

But let’s not kid ourselves. There’s more going on here than mischance and the natural side effects of growth, and this is particularly true for Facebook and Twitter. When we talk about loss of faith in tech, most of the time, I think, we mean loss of faith in social media. It’s true that we don’t want them to become censors. The problem is that they already are, as a side effect, via their algorithms which show posts and tweets with high “engagement” — i.e. how vehemently users respond. The de facto outcome is to amplify outrage, and hence disinformation.

It may well be true, in a neutral environment, that the best answer to bad speech is more speech. The problem is that Facebook and Twitter are anything but neutral environments. Their optimization for “engagement” is a Brobdingnagian thumb on their scales, tilting their playing fields into whole Himalayas of advantages for bad faith, misinformation, disinformation, outrage and hate.

This optimization isn’t even necessary for their businesses to be somewhat successful. In 2014, Twitter had a strict chronological timeline, and recorded a $100 million profit before stock-based compensation — with relatively primitive advertising infrastructure, compared to today. Twitter and Facebook could kill the disinformation problem tomorrow, with ease, by switching from an algorithmic, engagement-based timeline back to a strict chronological one.

Never going to happen, of course. It would hurt their profits and their stock price too much. Just like Google was never going to consider itself bound to DeepMind’s cofounder’s assurance two years ago that “DeepMind operates autonomously from Google.” Just like Amazon was never going to consider whether siphoning money from local governments at its new so-called “co-headquarters” was actually going to be good for its new homes. Because while technology has benefited individuals, enormously, it’s really benefited technology’s megacorporations, and they’re going to follow their incentives, not ours.

Mark Zuckerberg’s latest post begins: “Many of us got into technology because we believe it can be a democratizing force for putting power in people’s hands.” I agree with that statement. Many of us did. But, looking back, were we correct? Is it really what the available evidence show us? Has it, perhaps, put some power in people’s hands — but delivered substantially more to corporations and governments?

I fear that the available evidence seems to confirm, instead, the words of tech philosopher-king Maciej Ceglowski. His most relevant rant begins with a much simpler, punchier phrase: “Technology concentrates power.” Today it seems harder than ever to argue with that.

WhatsApp could wreck Snapchat again by copying ephemeral messaging

WhatsApp already ruined Snapchat’s growth once. WhatsApp Status, its clone of Snapchat Stories, now has 450 million daily active users compared to Snapchat’s 188 million. That’s despite its 24-hour disappearing slideshows missing tons of features including augmented reality selfie masks, animated GIFs, or personalized avatars like Bitmoji. A good enough version of Stories conveniently baked into the messaging app beloved in the developing world where Snapchat wasn’t proved massively successful. Snapchat actually lost total users in Q2 and Q3 2018, and even lost Rest Of World users in Q2 despite that being where late stage social networks rely on for growth.

That’s why it’s so surprising that WhatsApp hasn’t already copied the other big Snapchat feature, ephemeral messaging. When chats can disappear, people feel free to be themselves — more silly, more vulnerable, more expressive. For teens who’ve purposefully turned away from the permanence of the Facebook profile timeline, there’s a sense of freedom in ephemerality. You don’t have to worry about old stuff coming back to haunt or embarass you. Snapchat rode this idea to become a cultural staple for the younger generation.

Yet right now WhatsApp only lets you send permanent photos, videos, and texts. There is an Unsend option, but it only works for an hour after a message is sent. That’s far from the default ephemerality of Snapchat where seen messages disappear once you close the chat window unless you purposefully tap to save them.

Instagram has arrived at a decent compromise. You can send both permanent and temporary photos and videos. Text messages are permanent by default, but you can unsend even old ones. The result is the flexibility to both chat through expiring photos and off-the-cuff messages knowing they will or can disappear, while also being able to have reliable, utilitarian chats and privately share photos for posterity without the fear that one wrong tap could erase them. When Instagram Direct added ephemeral messaging, it saw a growth spurt to over 375 million monthly users as of April 2017.

Snapchat lost daily active users the past two quarters

WhatsApp should be able to build this pretty easily. Add a timer option when people send media so photos or videos can disappear after 10 seconds, a minute, an hour, or a day. Let people add a similar timer to specific messages they send, or set a per chat thread default for how long your messages last similar to fellow encrypted messaging app Signal.

Snap CEO Evan Spiegel’s memo leaked by Cheddar’s Alex Heath indicates that he views chat with close friends as the linchpin of his app that was hampered by this year’s disastrous redesign. He constantly refers to Snapchat as the fastest way to communicate. That might be true for images but not necessarily text, as BTIG’s Rich Greenfield points out, citing how expiring text can causes conversations to break down. It’s likely that Snapchat will double-down on messaging now that Stories has been copied to death.

Given its interest in onboarding older users, that might mean making texts easier to keep permanent or at least lengthening how long they last before they disappear. And with its upcoming Project Mushroom re-engineering of the Snapchat app so it works better in developing markets, Snap will increasingly try to become WhatsApp.

…Unless WhatsApp can become Snapchat first. Spiegel proved people want the flexibility of temporary messaging. Who cares who invented something if it can be brought to more people to deliver more joy? WhatsApp should swallow its pride and embrace the ephemeral.

How cities can fix tourism hell

A steep and rapid rise in tourism has left behind a wake of economic and environmental damage in cities around the globe. In response, governments have been responding with policies that attempt to limit the number of visitors who come in. We’ve decided to spare you from any more Amazon HQ2 talk and instead focus on why cities should shy away from reactive policies and should instead utilize their growing set of technological capabilities to change how they manage tourists within city lines.

Consider this an ongoing discussion about Urban Tech, its intersection with regulation, issues of public service, and other complexities that people have full PHDs on. I’m just a bitter, born-and-bred New Yorker trying to figure out why I’ve been stuck in between subway stops for the last 15 minutes, so please reach out with your take on any of these thoughts: @Arman.Tabatabai@techcrunch.com.
  

The struggle for cities to manage “Overtourism”

Well – it didn’t take long for the phrase “overtourism” to get overused. The popular buzzword describes the influx of tourists who flood a location and damage the quality of life for full-time residents. The term has become such a common topic of debate in recent months that it was even featured this past week on Oxford Dictionaries’ annual “Words of the Year” list.

But the expression’s frequent appearance in headlines highlights the growing number of cities plagued by the externalities from rising tourism.

In the last decade, travel has become easier and more accessible than ever. Low-cost ticketing services and apartment-rental companies have brought down the costs of transportation and lodging; the ubiquity of social media has ticked up tourism marketing efforts and consumer demand for travel; economic globalization has increased the frequency of business travel; and rising incomes in emerging markets have opened up travel to many who previously couldn’t afford it.

Now, unsurprisingly, tourism has spiked dramatically, with the UN’s World Tourism Organization (UNWTO) reporting that tourist arrivals grew an estimated 7% in 2017 – materially above the roughly 4% seen consistently since 2010. The sudden and rapid increase of visitors has left many cities and residents overwhelmed, dealing with issues like overcrowding, pollution, and rising costs of goods and housing.

The problems cities face with rising tourism are only set to intensify. And while it’s hard for me to imagine when walking shoulder-to-shoulder with strangers on tight New York streets, the number of tourists in major cities like these can very possibly double over the next 10 to 15 years.

China and other emerging markets have already seen significant growth in the middle-class and have long runway ahead. According to the Organization for Economic Co-operation and Development (OECD), the global middle class is expected to rise from the 1.8 billion observed in 2009 to 3.2 billion by 2020 and 4.9 billion by 2030. The new money brings with it a new wave of travelers looking to catch a selfie with the Eiffel Tower, with the UNWTO forecasting international tourist arrivals to increase from 1.3 billion to 1.8 billion by 2030.

With a growing sense of urgency around managing their guests, more and more cities have been implementing policies focused on limiting the number of tourists that visit altogether by imposing hard visitor limits, tourist taxes or otherwise.

But as the UNWTO points out in its report on overtourism, the negative effects from inflating tourism are not solely tied to the number of visitors in a city but are also largely driven by touristy seasonality, tourist behavior, the behavior of the resident population, and the functionality of city infrastructure. We’ve seen cities with few tourists, for example, have experienced similar issues to those experienced in cities with millions.

While many cities have focused on reactive policies that are meant to quell tourism, they should instead focus on technology-driven solutions that can help manage tourist behavior, create structural changes to city tourism infrastructure, while allowing cities to continue capturing the significant revenue stream that tourism provides.

Smart city tech enabling more “tourist-ready” cities

THOMAS COEX/AFP/Getty Images

Yes, cities are faced with the headwind of a growing tourism population, but city policymakers also benefit from the tailwind of having more technological capabilities than their predecessors. With the rise of smart city and Internet of Things (IoT) initiatives, many cities are equipped with tools such as connected infrastructure, lidar-sensors, high-quality broadband, and troves of data that make it easier to manage issues around congestion, infrastructure, or otherwise.

On the congestion side, we have already seen companies using geo-tracking and other smart city technologies to manage congestion around event venues, roads, and stores. Cities can apply the same strategies to manage the flow of tourist and resident movement.

And while you can’t necessarily prevent people from people visiting the Louvre or the Coliseum, cities are using a variety of methods to incentivize the use of less congested space or disperse the times in which people flock to highly-trafficked locations by using tools such as real-time congestion notifications, data-driven ticketing schedules for museums and landmarks, or digitally-guided tours through uncontested routes.

Companies and municipalities in cities like London and Antwerp are already working on using tourist movement tracking to manage crowds and help notify and guide tourists to certain locations at the most efficient times. Other cities have developed augmented reality tours that can guide tourists in real-time to less congested spaces by dynamically adjusting their routes.

A number of startups are also working with cities to use collected movement data to help reshape infrastructure to better fit the long-term needs and changing demographics of its occupants. Companies like Stae or Calthorpe Analytics use analytics on movement, permitting, business trends or otherwise to help cities implement more effective zoning and land use plans. City planners can use the same technology to help effectively design street structure to increase usable sidewalk space and to better allocate zoning for hotels, retail or other tourist-friendly attractions.

Focusing counter-overtourism efforts on smart city technologies can help adjust the behavior and movement of travelers in a city through a number of avenues, in a way tourist caps or tourist taxes do not.

And at the end of the day, tourism is one of the largest sources of city income, meaning it also plays a vital role in determining the budgets cities have to plow back into transit, roads, digital infrastructure, the energy grid, and other pain points that plague residents and travelers alike year-round. And by disallowing or disincentivizing tourism, cities can lose valuable capital for infrastructure, which can subsequently exacerbate congestion problems in the long-run.

Some cities have justified tourist taxes by saying the revenue stream would be invested into improving the issues overtourism has caused. But daily or upon-entry tourist taxes we’ve seen so far haven’t come close to offsetting the lost revenue from disincentivized tourists, who at the start of 2017 spent all-in nearly $700 per day in the US on transportation, souvenirs and other expenses according to the U.S. National Travel and Tourism Office.

In 2017, international tourism alone drove to $1.6 trillion in earnings and in 2016, travel & tourism accounted for roughly 1 in 10 jobs in the global economy according to the World Travel and Tourism Council. And the benefits of travel are not only economic, with cross-border tourism promoting transfers of culture, knowledge and experience.

But to be clear, I don’t mean to say smart city technology initiatives alone are going to solve overtourism. The significant wave of growth in the number of global travelers is a serious challenge and many of the issues that result from spiking tourism, like housing affordability, are incredibly complex and come down to more than just data. However, I do believe cities should be focused less on tourist reduction and more on solutions that enable tourist management.

Utilizing and allocating more resources to smart city technologies can not only more effectively and structurally limit the negative impacts from overtourism, but it also allows cities to benefit from a significant and high growth tourism revenue stream. Cities can then create a virtuous cycle of reinvestment where they plow investment back into its infrastructure to better manage visitor growth, resident growth, and quality of life over the long-term. Cities can have their cake and eat it too.

And lastly, some reading while in transit:

SparkLabs Taipei closes initial $4.25M for its first fund, adds Jeremy Lin as an advisor

SparkLabs Taipei, part of SparkLabs Group, the global network of accelerator programs and funds that works with emerging startup ecosystems, has raised $4.25 million in an initial close led by CTBC Group, along with individual investors, for its first venture capital fund. SparkLabs Taipei also announced today that it has added Atlanta Hawks player Jeremy Lin, who sparked “Linsanity” as the first player of Chinese- or Taiwanese-descent in the NBA, to its board of advisors.

The funding was first disclosed in a Form D filed with the SEC this week that says SparkLabs Taipei’s ultimate goal for the fund is to raise $10 million.

In a prepared statement, Lin said “SparkLabs Taipei is an innovative fund offering support and guidance for entrepreneurs in Taiwan. Being a trailblazer is challenging and having a strong support is critical to your success. I’m excited to join a strong team of partners and advisors at SparkLabs Taipei and look forward to meeting some great entrepreneurs.”

Other SparkLabs Taipei advisors include YouTube co-founder Steve Chen; Kabam co-founder and CEO Kevin Chou; and RedOctane (the producer of Guitar Hero) co-founders Charles and Kai Huang.

SparkLabs Taipei was launched last year under the leadership of Edgar Chiu, the former COO of Taipei-based app developer Gogolook (acquired by Korean Internet giant Naver in 2013) and founding general manager of Camp Mobile Taiwan, part of Naver’s mobile app development subsidiary. In an interview with TechCrunch at the time, Chiu said SparkLabs Taipei’s goal is to help prepare Taiwanese startups to enter global markets.

In a press statement, Chiu said “Jeremy Lin embodies what we look for in our entrepreneurs. Persistence, dedication, and hard work. Our team is extremely excited and proud to have him on board and join an already stellar board of advisors. Plus I’ve been a big fan when he first joined the NBA, through the craziness of ‘Linsanity’ and his continued excellence in the NBA.”

While the SparkLabs network backs tech companies from around the world, it is known in particular for its work with Asian startups. SparkLabs launched in South Korea in 2012, and since then has opened accelerator programs across the Asia-Pacific region and in Washington, D.C., including programs dedicated to financial technology, agriculture, cybersecurity and blockchain startups, and energy.

The Boring Company goes brick-and-mortar with The Brick Store

Elon Musk has shot out some crazy, unbelievable tweets over the last year, but he wasn’t joking about the bricks. Musk has started a company called The Brick Store LLC to produce and sell bricks, according to public documents obtained by TechCrunch.

The new company, which was founded in July, will be managed by Steve Davis, the ex-SpaceX engineer who is also running The Boring Company (TBC).

TBC is developing new tunneling and transportation technologies, and the bricks will be made from soil displaced by the company’s tunnel-boring machines. Elon Musk has tweeted that the bricks could cost as little as 10 cents each, and might even be given away to affordable housing projects.

The Brick Store’s first physical outlet will be a far cry from Tesla’s sleek, designer showrooms. Planning documents submitted to Hawthorne, a city in southwestern Los Angeles County, show a rundown stucco building about a mile from TBC and SpaceX’s headquarters. Forbidding black steel security grilles “will be utilized … to accent the entrances and windows,” TBC wrote in its application to repaint the building.

Despite these design flourishes, TBC did not select the building for its aesthetic appeal. The building — formerly housing a kitchen cabinet business — is located above an exit tunnel that TBC is digging to extract the boring machine from its first test tunnel. This is intended to showcase Loop, a proposed underground transportation system carrying people or cars on self-contained electric skates traveling at up to 150 miles per hour.

The tunnel was originally planned to stretch around two miles under public roads from a parking structure next to SpaceX. However, in April this year, TBC used a subsidiary to quietly buy the Hawthorne corner lot, which sits about halfway along the planned route, for $2 million.

In July, TBC asked Hawthorne for permission to use that lot to build an access shaft to extract its tunnel-boring machine, which, because it cannot move backwards, would otherwise have been abandoned at the end of the excavation.

The same month, Musk founded The Brick Store, whose purpose, according to state filings, is the “manufacture and sale of bricks.” TBC has already produced some structures from bricks made from tunnel spoil, and Musk tweeted yesterday that they would be used to build a watchtower at the entrance to the tunnel.

Turning tunnel waste into a valuable commodity fits in with Musk’s environmental leanings — and will save TBC from the cost of disposing all that dirt. TBC has even suggested that the bricks could potentially be used as part of the tunnel lining itself. Musk has previously said that the tunnel would officially open on December 10.

TBC did not immediately respond to requests for comment on this story.

Bricks made from everyday soil, usually called compressed earth blocks (CEB), date back to ancient times. CEBs are still used in developing countries today, and are part of building codes in California and New Mexico. But even there, the market for them is tiny — possibly because CEB buildings can be awkward to build, wire and insulate. BC has even suggested that the bricks could potentially be used as part of the tunnel lining itself.

Dwell Earth sells machines that produce CEBs by applying pressure to a mixture of earth and a little cement.

“Elon seems to have a way of bringing energy and talent to big challenges, and we are happy to see that he may be as excited about [CEBs] as we are,” Dwell Earths founder Bob de Jong told TechCrunch.

The Boring Company

TBC received around $112 million from Musk earlier this year. These funds will be used to build a number of tunnels around the country, including a Loop to connect Dodger Stadium to the subway in L.A., one that would link Chicago and O’Hare airport, as well as an ambitious commuter Loop between Washington, D.C. and Maryland.

These projects could be thwarted, or at least delayed, because of an increasingly heated trade war between the U.S. and China.

TBC lawyers wrote to the United States Trade Representative in July that the tariffs imposed by President Trump on Chinese-tunneling machine parts, among other products, would delay its projects by up to two years and mean lost job opportunities. The company asked for an exemption from the tariffs that has not yet been granted.

If there’s anyone who can re-brand dirt and build a market for CEBs, it’s Elon Musk. But even if The Brick Store’s bricks don’t raise enough money for a Mars mission or save the planet, at least they are a little more practical than a novelty “not a flamethrower.”

Feeling left out of a hot market? This new outfit has a fund with shares of 30 top ‘unicorns’ to sell you

When Equidate, a venture-backed secondaries marketplace based in San Francisco, closed its most recent round of funding with $50 million four months ago, it was hardly a surprising bet on the part of its backers. As startups linger ever longer as private companies, more people are looking to lock up shares wherever they can find them.

Investors have plenty of platforms from which to choose. In addition to Equidate, other companies that match investors with “pre-IPO” company shares include EquityZen, SharesPost, and Seedrs. Still, individual investors have mostly been relegated to choosing this or that company on a piecemeal basis as shares have become available. Among few exceptions to this rule include investors in venture funds like 137 Ventures, whose express aim is creating a portfolio of secondary shares that have been acquired from earlier investors, founders, and employees, or in Industry Ventures, which has been buying up later-stage secondary shares since its founding in 2000. (Investing in SoftBank’s Vision Fund, which is piecing together a portfolio of unicorn companies, might be another option for people with enough access, though it comes with certain strings attached.

No wonder Equidate thinks there’s a better way, And with the financial wind at its back, it just began testing out its theory. How? By spinning off a new asset management business whose sole purpose is to acquire shares in the “top” private companies that are currently valued at more than a billion dollars but that still trade privately.

It isn’t going to buy 5 or 20 or 100 stakes. Instead, the portfolio will maintain positions in exactly 30 companies, and these will be adjusted on a quarterly basis, led by the person leading this new spin-off: Ziad Makkawi, a longtime investment advisor who recently spent two years as CEO of Qatar First Bank.

As Equidate founder and President Sohail Prasad see it, his company is already spending time learning an awful lot about Palantir and Stripe and WeWork and Pinterest. It tracks bid and ask activity, along with how pricing and valuations are reflected by both new transactions and time decay. To underscore how much data is coursing through Equidate, he says that company now sees $1 billion in transaction volume on its platform annually.

After a point, he and the rest of Equidate’s management concluded that it made sense to create an index to track the health of these companies in a way that makes it easier to understand their performance relative to their peers (it rolled this out yesterday). It also decided to create a product around the index. Enter its new fund and accompanying asset management firm.

“We’re excited,” says Prasad. “This is going to let people buy for the first time a basket of all of these companies, which are vetted and that are already in their growth stages and in, really, in previous years, would have been public already.”

It’s easy to see other investors getting excited about a kind of exchange traded fund filled with unicorns, too. But first things first. The new fund is still being raised, sounds like. It’s looking to close with between $50 million and $100 million in capital. It’s also worth noting that although SEC Chairman Jay Clayton has said he’d like the agency to allow more retail investors a shot at companies that have been out of their reach, Equidate’s new spin-off, Equiam, will still only accept checks from accredited investors, and they need to invest at least $250,000 .

There’s also the prickly question of whether the companies that investors want most are accessible to Equiam. Unsurprisingly, Prasad, argues that it’s not an issue. “Because we’ll be a larger fund, we’ll be able to buy blocks of preferred stock where traditionally a person might not have access. We do have access at this scale.”

As for what Equiam is charging in management fees, the fund is “incredibly low cost,” says Prasad. Investors will have to decide whether they agree, but those who write the fund a $1 million or bigger check will pay a 1.5 percent management fee. Investors who come in at between $250,000 and $1 million will pay a 2.5 percent management fee.

If you’re curious about to learn more, you can learn more by checking out Equiam’s site here.