How Upstream plans to unlock liquidity in the $5bn crowdfunding market
By Vanessa Malone
This week we announced that Horizon has signed a joint venture and licensing agreement with MERJ Exchange, an affiliate of the World Federation of Exchanges, to launch “Upstream,” a revolutionary app-based market for crowdfunded securities.
Over the last few years, billions have been invested in early-stage companies, yet no dedicated exchange has existed to provide exit-liquidity. Expected to launch Q1 2021, Upstream will provide the first secondary market for crowdfunded securities to trade in real-time from a user-friendly trading app.
Upstream is accepting listing applications from existing issuers who have completed their offerings on crowdfunding platforms around the world, and who are looking to provide exit-liquidity to their shareholders and offer their shares to a whole new set of fans, investors, and traders. Register interest at https://upstream.exchange.
What’s the significance?
Arguably one of the biggest gaps in the equity crowdfunding infrastructure has always been secondary liquidity. Typically, investments in the private market are deemed illiquid as investors could wait years to see a return, depending on when a company is sold or goes public.
Companies also have the resources to stay private longer.
McKinsey & Company’s 2018 Global Private Markets Review found that global private market fundraising increased by $28.2 billion in 2017, to a total of $748 billion in 2018. In 2019, the SEC reported that exempt securities offerings accounted for the majority of all new capital raised in 2019 in the U.S. Favorable regulation and increased access to capital enables companies to push costly, traditional IPOs down the line.
Meanwhile, equity crowdfunding continues to establish itself as an innovative way to raise meaningful capital from fans, supporters, and other interested investors. A lack of an accessible secondary market is locking up this early stage capital.
This is where the Upstream market and user-friendly trading app comes in.
Here are some of the key differentiators:
- Upstream is not an Alternative Trading System (ATS). An ATS is a dark pool that doesn’t allow for open communication outside of its walls. Upstream is a MERJ Exchange market, a global securities exchange with a transparent orderbook servicing issuers around the world. Upstream will offer regulated trading and settlement of cash market securities to investors of all levels.
- Built primarily to support crowdfunding industry. While traditional marketplaces may cater to sophisticated investors, Upstream was built for investors of all levels with streamlined trading strategy tools and unique engagement features to keep up with the start-ups you invest in.
- Transparent, investor-driven market enforced by blockchain technology. Although kept in the background as to maintain an intuitive trading experience, Upstream enforces MERJ market rules using blockchain technology. Upstream has a public orderbook with best bids and offers transparently displayed in real-time on the Ethereum public blockchain. The orderbook is driven by the investor community rather than market makers.
- Multi-currency exchange. Investors’ accounts include new named fiat bank accounts set up inside Upstream to safely deposit and withdraw funds. Investors securely trade and instantly settle securities in EUR, USD, JPY or GBP using the Upstream app. Securities eligible to list include common stock, preferred stock, bonds and compliantly issued security tokens.
- Home to fan-driven asset classes. Upstream supports securities offerings tied to fan-driven asset classes including athletes, sports teams, celebrities, and musicians that immediately become eligible for secondary trading.
Quotes from the Upstream team:
“For years, investors in the crowdfunding space have been supporting their favorite companies with no visible exit in sight,” said Horizon President Mark Elenowitz. “Upstream will deliver an intuitive app for retail investors to trade their positions and re-invest in high-growth opportunities, or even share in an athlete or artist’s future income.”
Horizon CEO Brian Collins said, “Our trading platform offers exciting new listing opportunities, and by engaging with existing crowdfunding sites and their issuers around the globe, we believe Upstream provides a vital secondary market that the crowdfunding industry has been waiting for.”
“MERJ has been one of the fastest growing exchanges in the world for the last 2 years. We achieved this growth by addressing the needs of issuers and investors,” said MERJ CEO Ed Tuohy.² “Upstream offers an important solution for the maturing equity crowdfunding market, combining an established regulatory framework with best-in-class technology.”
Upstream is a global marketplace for crowdfunded securities. Powered by Horizon’s proprietary matching engine technology, the exchange will enable investors to trade shares in high-growth startups and other unique asset classes directly from the trading app https://upstream.exchange.
MERJ Exchange (MERJ) operates Upstream as a fully regulated and licensed integrated securities exchange, clearing system and depository for digital and non-digital securities. MERJ is an affiliate of the World Federation of Exchanges (WFE), recognized by HM Revenue and Customs UK, a full member of the Association of National Numbering Agencies (ANNA) and a Qualifying Foreign Exchange for OTC Markets in the US. MERJ is also a member of the Sustainable Stock Exchanges Initiative.
Horizon is a fintech company that builds and powers global securities exchanges with an integrated suite of software for compliant issuance, management, and secondary trading of securities. Our in-house solutions combine Wall Street and Silicon Valley to power the next generation of securities offerings and trading in the U.S. and globally. Learn more at https://www.horizonfintex.com/.