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These Forge cofounders just raised $5 million to work on a new, still-stealth investing startup
Sohail Prasad and Samvit Ramadurgam are cofounders who met during Y Combinator’s 2012 summer batch and went on to cofound Forge, which helps accredited investors and institutions buy and sell private company shares and which most recently raised $150 million in new funding in May.
Forge — originally known as Equidate — has taken off as demand for private company shares has ballooned. The company, launched in 2014, has now raised $250 million altogether, including from, Deutsche Börse, Temasek, Wells Fargo, BNP Paribas, and Munich Re. It acquired rival SharesPost last year for $160 million in cash and stock. According to the company, it now has more than $14 billion in assets under custody.
Prasad and Ramadurgam — who helped hire Forge CEO Kelly Rodriques back in 2018 — say they’re excited about that success. They still own a stake in the company; they remain non-voting board members.
But after spending 18 months as co-president of Forge at the outset of Rodrigues’s tenure, they left early last year to begin tinkering on a new idea, one that Prasad says is centered around giving a much wider pool of people access to private company shares. Called D/XYZ (pronounced “Destiny”), the idea is to enable any investor — not just the 1% — to invest in startups whose services they use and love.
Unfortunately, the two aren’t offering much more of a curtain raiser than that right now, though Prasad suggests D/XYZ is neither a new fund nor a crowdfunding vehicle. It’s also not selling any tokens, we gather. Instead, Prasad hints at an entirely new product, saying the company is being cautious in how much it shares publicly because it first wants to “get the go-ahead from regulators, as well as to ensure we have a clear path to market,” he says.
In the meantime, the two have raised $5 million in seed funding from numerous founders who like the idea of making private company shares easier for their parents, friends, customers, partners, and everyone else who likes what they’re building. Among the round’s participants is Coinbase cofounder Fred Ehrsam; Plaid cofounder and CEO Zach Perret; Quora and Expo cofounder Charlie Cheever; Superhuman founder and CEO Rahul Vohra; and serial entrepreneur Siqi Chen, who most recently founded a finance software company called Runway.
As for some of the nascent startup’s most obvious competition, Prasad doesn’t sound concerned. Asked, for example, about Carta, a well-funded company that helps private companies and their employees manage and sell their stock and options and that has long talked about democratizing access to private company shares, Prasad says it remains very much a direct competitor instead to Forge given that both cater first and foremost to companies, not individuals.
And what of SPACs, the special purpose acquisition companies that are moving private companies onto the public market faster, allowing (at least in theory) more people to access high-growth companies at earlier stages? It’s a partial solution, says Prasad. But the way he sees it, “SPACs are more a reflection that people want late-stage access to private tech and their best option right now is giving money to a SPAC manager who will hopefully find a promising company to merge with in two years or less.” He calls them a “layer of abstraction.”
Of course, there’s also the question of whether Forge will be a friend of foe if whatever Prasad and Ramadurgam are building succeeds. Could their tech be sold back to their first company? Could Forge come to see them as a rival to its business?
“What we’re doing now is not competitive,” insists Prasad. “It’s more picking up the mantle where we left off. Forge is focused on trading, custody, company solutions and data. It has built what some call boring plumbing.” Now that the plumbing has been erected, it has “enabled a lot of other interesting things to be built, too.”
So is D/XYZ working with Forge in some capacity? Prasad demurs. “Potentially,” he says.
In other words, stay tuned.
Pictured above, left to right: Sohail Prasad and Samvit Ramadurgam.
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What the NFT? VC David Pakman dumbs down the digital collectibles frenzy and why it’s taking off now
Non-fungible tokens have been around for two years, but these NFTs, one-of-one digital items on the Ethereum and other blockchains, are suddenly becoming a more popular way to collect visual art, primarily, whether it’s an animated cat or an NBA clip or virtual furniture.
“Suddenly” is hardly an overstatement. According to the outlet Cointelegraph, during the second half of last year, $9 million worth of NFT goods sold to buyers; during one 24-hour window earlier this week, $60 million worth of digital goods were sold.
What’s going on? A thorough New York Times piece on the trend earlier this week likely fueled new interest, along with a separate piece in Esquire about the artist Beeple, a Wisconsin dad whose digital drawings, which he has created every single day for the last 13 years, began selling like hotcakes in December. If you evidence of a tipping point (and it’s amply available), the work of Beeple, whose real name is Mike Winkelmann, was just made available through Christie’s. It’s the venerable auction house’s first sale of exclusively digital work.
To better understand the market and why it’s blowing up in real time, we talked this week with David Pakman, a former internet entrepreneur who joined the venture firm Venrock a dozen years ago and began tracking Bitcoin soon after, even mining the cryptocurrency at his Bay Area home beginning in 2015. (“People would come over and see racks of computers, and it was like, ‘It’s sort of hard to explain.’”)
Perhaps it’s no surprise that he also became convinced early on of the promise of NFTs, persuading Venrock to lead the $15 million Series A round for a young startup, Dapper Labs, when its primary offering was CryptoKitties, limited-edition digital cats that can be bought and bred with cryptocurrency.
While the concept baffled some at the time, Pakman has long seen the day when Dapper’s offerings will be far more extensive, and indeed, a recent Dapper deal with the NBA to sell collectible highlight clips has already attracted so much interest in Dapper that it is reportedly right now raising $250 million in new funding at a post-money valuation of $2 billion. While Pakman declined to confirm or correct that figure, but he did answer our other questions in a chat that’s been edited here for length and clarity.
TC: David, dumb things down for us. Why is the world so gung-ho about NFTs right now?
DP: One of the biggest problems with crypto — the reason it scares so many people — is it uses all these really esoteric terms to explain very basic concepts, so let’s just keep it really simple. About 40% of humans collect things — baseball cards, shoes, artwork, wine. And there’s a whole bunch of psychological reasons why. Some people have a need to complete a set. Some people do it for investment reasons. Some people want an heirloom to pass down. But we could only collect things in the real world because digital collectibles were too easy to copy.
Then the blockchain came around and [it allowed us to] make digital collectibles immutable, with a record of who owns what that you can’t really copy. You can screenshot it, but you don’t really own the digital collectible, and you won’t be able to do anything with that screenshot. You won’t be able to to sell it or trade it. The proof is in the blockchain. So I was a believer that crypto-based collectibles could be really big and actually could be the thing that takes crypto mainstream and gets the normals into participating in crypto — and that’s exactly what’s happening now.
TC: You mentioned a lot of reasons that people collect items, but one you didn’t mention is status. Assuming that’s your motivation, how do you show off what you’ve amassed online?
DP: You’re right that one of the other reasons why we collect is to show it off status, but I would actually argue it’s much easier to show off our collections in the digital world. If I’m a car collector, the only way you’re going to see my cars is to come over to the garage. Only a certain number of people can do that. But online, we can display our digital collections. NBA Top Shop, for example, makes it very easy for you to show off your moments. Everyone has a page and there’s an app that’s coming and you can just show it off to anyone in your app, and you can post it to your social networks. And it’s actually really easy to show off how big or exciting your collection is.
TC: It was back in October that Dapper rolled out these video moments, which you buy almost like a Pokemon set in that you’re buying a pack and know you’ll get something “good” but don’t know what. But while almost half it sales have come in through the last week. Why?
DP: There’s only about maybe 30,000 or 40,000 people playing right now. It’s growing 50% or 100% a day. But the growth has been completely organic. The game is actually still in beta, so we haven’t been doing any marketing other than posting some stuff on Twitter. There hasn’t been attempt to market this and get a lot of players [talking about it] because we’re still working the bugs out, and there are a lot of bugs still to be worked out.
But a couple NBA players have seen this and gotten excited about their own moments [on social media]. And there’s maybe a little bit of machismo going on where, ‘Hey, I want my moment to trade for a higher price.’ But I also think it’s the normals who are playing this. All you need to play is a credit card, and something like 65% of the people playing have never owned or traded in crypto before. So I think the thesis that crypto collectibles could be the thing that brings mainstream users into crypto is playing out before our eyes.
TC: How does Dapper get paid?
DP: We get 5% of secondary sales and 100% minus the cost of the transaction on primary sales. Of course, we have a relationship with the NBA, which collects some of that, too. But that’s the basic economics of how the system works.
TC: Does the NBA have a minimum that it has to be paid every year, and then above and beyond that it receives a cut of the action?
DP: I don’t think the company has gone public with the exact economic terms of their relationships with the NBA and the Players Association. But obviously the NBA is the IP owner, and the teams and the players have economic participation in this, which is good, because they’re the ones that are creating the intellectual property here.
But a lot of the appreciation of these moments — if you get one in a pack and you sell it for a higher price — 95% of that appreciation goes to the owner. So it’s very similar to baseball cards, but now IP owners can participate through the life of the product in the downstream economic activity of their intellectual property, which I think is super appealing whether you’re the NBA or someone like Disney, who’s been in the IP licensing business for decades.
And it’s not just major IP where this NFT space is happening. It’s individual creators, musicians, digital artists who could create a piece of digital art, make only five copies of it, and auction it off. They too can collect a little bit each time their works sell in the future.
TC: Regarding NBA Top Shot specifically, prices range massively in terms of what people are paying for the same limited-edition clip. Why?
DP: There are two reasons. One is that like scarce items, lower numbers are worth more than higher numbers, so if there’s a very particular LeBron moment, and they made 500 [copies] of them, and I own number one, and you own number 399, the marketplace is ascribing a higher value to the lower numbers, which is very typical of limited-edition collector pieces. It’s sort of a funny concept. But it is a very human concept.
The other thing is that over time there has been more and more demand to get into this game, so people are willing to pay higher and higher prices. That’s why there’s been a lot of price appreciation for these moments over time.
TC: You mentioned that some of the esoteric language around crypto scares people, but so does the fact that 20% of the world’s bitcoin is permanently inaccessible to its owners, including because of forgotten passwords. Is that a risk with these digital items, which you are essentially storing in a digital locker or wallet?
DP: It’s a complex topic, but I will say that Dapper has tried to build this in a way where that won’t happen, where there’s effectively some type of password recovery process for people who are storing their moments in Dapper’s wallet.
You will be able to take your moments away from Dapper’s account and put it into other accounts, where you may be on your own in terms of password recovery.
TC: Why is it a complex topic?
DP: There are people who believe that even though centralized account storage is convenient for users, it’s somehow can be distrustful — that the company could de-platform you or turn your account off. And in the crypto world, there’s almost a religious ferocity about making sure that no one can de-platform you, that the things that you buy — your cryptocurrencies or your NFTs. Long term, Dapper supports that. You’ll be able to take your moments anywhere you want. But today, our customers don’t have to worry about that I-lost-my-password-and-I’ll-never-get-my-moments-again problem.
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Carta’s startup liquidity service CartaX conducts first transactions on its own cap table
As startups have stayed private longer and liquidity has become harder to secure for early employees and investors, more and more shareholders have looked for ways to unload their shares to others. All the way back in 2011, companies like SecondMarket were seeing nine-figures’ worth of shares being traded on their secondary share platforms.
That wave of liquidity startups ran into two problems: One was regulatory, and the other was a lack of company information about cap tables and that company’s current financial picture. Stock buyers were essentially flying blind while buying into companies, which some investors were more than willing to do, but that blindness limited the market demand for secondary shares significantly.
Carta is hoping that its base as the cap table management solution of choice for many startups will allow it to parlay that position into a new service it has called CartaX. We’ve heard rumblings about the service for more than a year now, but according to a new blog post by founder Henry Ward, it looks like the product is exiting beta and starting to operate in the real world with real money.
Yesterday, Carta sold just shy of $100 million of its shares across 1,484 market orders to 414 participants through its own CartaX product at a price of $6.9 billion. Ward says that is up from the $3.1 billion valuation of the company’s Series F round from last year.
As a comparison, secondary transactions typically involve secondary buyers who negotiate these deals manually one-on-one with individual sellers. What makes CartaX interesting is that it could allow for much faster and more frequent secondary sales at companies based on the same sort of computerized trading models that currently power the stock market.
Liquidity is a huge issue for startups, and while CartaX is just getting going, it fulfills a key need for many participants in the startup ecosystem, and it’s a key financial product to watch as it expands in 2021.
Meanwhile, revenues are looking good at Carta these days. According to an article earlier today by Zoë Bernard and Cory Weinberg at The Information, Carta has an ARR of $150 million. That’s a 46x revenue multiple if all the numbers are correct, which these days is good if not great for SaaS companies approaching the public markets.
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GitLab raises $195M in secondary funding on $6B valuation
GitLab has confirmed with TechCrunch that it raised a $195 million secondary round on a $6 billion valuation. CNBC broke the story earlier today.
The company’s impressive valuation comes after its most recent 2019 Series E in which it raised $268 million on a 2.75 billion valuation, an increase of $3.25 billion in under 18 months. Company co-founder and CEO Sid Sijbrandij believes the increase is due to his company’s progress adding functionality to the platform.
“We believe the increase in valuation over the past year reflects the progress of our complete DevOps platform towards realizing a greater share of the growing, multi-billion dollar software development market,” he told TechCrunch.
While the startup has raised over $434 million, this round involved buying employee stock options, a move that allows the company’s workers to cash in some of their equity prior to going public. CNBC reported that the firms buying the stock included Alta Park, HMI Capital, OMERS Growth Equity, TCV and Verition.
The next logical step would appear to be IPO, something the company has never shied away from. In fact, it actually at one point included the proposed date of November 18, 2020 as a target IPO date on the company wiki. While they didn’t quite make that goal, Sijbrandij still sees the company going public at some point. He’s just not being so specific as in the past, suggesting that the company has plenty of runway left from the last funding round and can go public when the timing is right.
“We continue to believe that being a public company is an integral part of realizing our mission. As a public company, GitLab would benefit from enhanced brand awareness, access to capital, shareholder liquidity, autonomy and transparency,” he said.
He added, “That said, we want to maximize the outcome by selecting an opportune time. Our most recent capital raise was in 2019 and contributed to an already healthy balance sheet. A strong balance sheet and business model enables us to select a period that works best for realizing our long-term goals.”
GitLab has not only published IPO goals on its Wiki, but its entire company philosophy, goals and OKRs for everyone to see. Sijbrandij told TechCrunch’s Alex Wilhelm at a TechCrunch Disrupt panel in September that he believes that transparency helps attract and keep employees. It doesn’t hurt that the company was and remains a fully remote organization, even pre-COVID.
“We started [this level of] transparency to connect with the wider community around GitLab, but it turned out to be super beneficial for attracting great talent as well,” Sijbrandij told Wilhelm in September.
The company, which launched in 2014, offers a DevOps platform to help move applications through the programming lifecycle.
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Brad Feld: what founders need to know about recent changes in VC deal terms
Extra Crunch offers members the opportunity to tune into conference calls led and moderated by the TechCrunch writers you read every day. This week, TechCrunch’s Connie Loizos hopped on the line with prominent investor, entrepreneur, thought leader, and Techstars co-founder Brad Feld to chat about the latest edition of his book “Venture Deals,” his advice to founders and investors, and his take on hot-button issues of the day.
In their conversation, Brad and Connie discuss the need to know information when it comes to preparing for, structuring and executing venture deals, and how that information has changed over the past several decades. Feld walks through the major topics that have been added in the latest edition of the book, such as how to handle venture debt, along with tactical attributes that aren’t currently in the book, such as secondary market trading.
Brad also shares his take on the most effective fundraising tactics for founders, and which common pieces of advice might be overblown.
Brad Feld: “I think the approach to the amount of money that you’re raising is both nuanced and evolves based on what financing round you’re at. So if you’re in an early round, some of the characteristics are different than if you’re in a later round. But I think the general truism… that I like to use when people say, ‘Well, how much money should I raise?’
I start with two variables and you the entrepreneur get to define those two variables. The two variables are: the amount of money you raise and what getting to the next level means. The amount of money you should raise is the amount of money that you need to get your business to the next level. There are lots of different ways to define what next level is and by forcing yourself internally to define next level and then define what you need in terms of capital to get to that next level… when you’re raising that first round of financing or even the second or third round of financing, it helps you size rationally what you need versus reactively to whatever the market characteristics are.
I actually encourage entrepreneurs to raise the least amount of money they need to get to the next level, or at least that’s the number that they go out to market with. Not a range, not a big number because you’re trying to drive some kind of valuation characteristic off a big number, but the amount of money that you actually think you need to get to the next level. Then if you can be oversubscribed, that’s an awesome situation.”
Feld and Connie dive deeper into current issues in the startup and venture landscape, including Brad’s take on the impact of the SoftBank Vision Fund, what went down internally and externally at both WeWork and Uber, as well as how boards, executives and founders can manage cult of personality and static company cultures.
For access to the full transcription and the call audio — and for the opportunity to participate in future conference calls — become a member of Extra Crunch. Learn more and try it for free.
Connie Loizos: I think the last time I saw you in person was out here in San Francisco at an event I was hosting and that was maybe two years ago?
Brad Feld: Yup, that’s right. That was at the Autodesk Lab if I remember correctly.
Loizos: Yes. It’s good to hear your voice, and thank you for joining us on this call. We have a lot of readers who are big fans of yours that are on the line and are eager to learn about your book “Venture Deals” and your broader thoughts about the current state of the market. That said — and I know you only have so much time — let’s dive first into the book. So Wiley, your publisher has just put out the fourth edition of this book “Venture Deals,” and it’s really easy to appreciate why. I was looking through it and it’s so incredibly instructive how venture deals come together and possible pitfalls to avoid. And given there are always new entrepreneurs emerging, it continues to be highly relevant.
How do you go about updating a book like this, given that some things change and some things stay the same?
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Unity, now valued at $6B, raising up to $525M
Unity’s private valuation is climbing but it’s growing unclear whether the company’s leadership is planning to take the 15-year-old gaming powerhouse public anytime soon.
The company announced today that is has received signed agreements from D1 Capital Partners, Canada Pension Plan Investment Board, Light Street Capital, Sequoia Capital, and Silver Lake Partners to fund a $525 million tender offer that will allow Unity’s common shareholders — the majority of which are early or current employees — to sell their shares in the company.
The tender offer gives employees “the opportunity for some liquidity,” Unity CFO Kim Jabal says. The total amount raised will depend on the enthusiasm of common shareholders to sell their stakes in Unity.
This event could potentially signify that the company is pushing back its timeline for an IPO, keeping employees that have been sitting on equity for several years happy as Unity labors on in private markets. It’s worth noting that the company has raised hundreds of million previously with the same intent of buying back employee shares.
It was reported earlier this year that Unity was targeting an IPO in the first half of 2020.
The company also confirmed that it wrapped up a $150M Series E funding round in May that doubled the company’s valuation to $6 billion. The announcement confirms the valuation we reported on in May though at a higher amount of capital raised.
SF-based Unity has more than 2,000 employees. The company builds developer tools which are used game studios to create video games across a number of platforms. The company claims that half of all games are created using the company’s game engine.
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