LONDON (Bywire News) - Until now, investing in big private firms with at least $1bn in value is not something for ordinary investors. Banks help firms chalk up investments of a million pounds or more each time. However, what if these investments come with a more affordable price tag, such as $1,000? If that were the case, it could open up venture capital to a much wider range of people.
Unicorns are start-ups with a value of more than £1bn and include some of the most successful companies in the world such as Airbnb, Uber and SpaceX.
Their numbers have grown rapidly over the past few years. In 2013, there was only 39 and they were all based in the US. By 2019, that number had grown to more than 500 spread across 24 countries and a combined value of £2 trillion.
With low-interest rates, and new technology this boom is offering investors the prospect of returns the like of which they won’t see anywhere else.
However, for most people getting involved is impossible. The availability of private equity makes them reluctant to go public and stock can be hard to find. Private banks typically only deal with high-net-worth investors, offering $1million a time.
The regulators are quite happy with the status quo. They don’t want ordinary people risking their life savings on risky investments. However, if the price tag were lower, more people could do it with less risk.
Those wanting to get involved with the next Facebook before it lists on the stock market would be able to do so.
Pressure is growing for something like that to happen. With wages and interest rates in the doldrums, the options for ordinary people who want to build a nest egg are limited. Those with money to invest are looking for other options such as crowdfunding which give people a chance to get in on the ground floor of the next exciting start-up.
The problem is technology, or rather a lack thereof. The existing set up lacks the necessary technology to make private securities mass market.
However, a number of digital-based securities platforms such as iStox are challenging the status quo.
It uses the blockchain to turn securities into tokens stored on distributed ledgers. These are permissionless and not public, like bitcoins, but have no value in the outside world. It means people who are able to invest as little as $1,100 have access to world-class investment opportunities which were previously out of reach.
By doing so, they offer a glimpse at an exciting and more democratic future in which ordinary investors have a chance to get involved with some of the most profitable investment opportunities in the world.
(Written by Tom Cropper, Edited by Klaudia Fior)