July 15, 2022

Productizing private investments

A brief story on why private markets are the next big thing and what we build at bunch.

Technology companies have changed the world. While doing so, the share of tech companies listed on the S&P 500 has also more than doubled in the past 20 years alone. These tech giants represent 9% of US GDP (Statista, 2022), and tech disruption will continue to be the main driver of growth throughout the next decades. Just think of the various traditional industries that still remain largely untouched by digital processes - there is still a lot to be done.

A large share of the value creation is increasingly happening within private markets, especially in tech. In search for yield, a lot of capital that would have traditionally been allocated to other asset classes has been flowing into private markets. In recent years, investors have become more comfortable with the intricacies of private markets. Private companies have reacted to this trend and are in turn increasingly staying private for much longer. Most prominently Stripe and Revolut currently have no apparent intention of going public any time soon but boast equity values larger than many publicly traded companies. And why should they go public? If companies have access to enough capital within private markets from more sophisticated investors, they do not need to go through the pain that an IPO and being listed brings with it. 

Private markets fundraising reached a new high (McKinsey's Private Markets Annual Review)

Simultaneously, we can observe a ‘seedification’ of private investments.  Thanks to the work of companies such as AWS, Figma, and Notion, it has never been easier to start a company. On the one hand, you need less capital than before to get started and at the same time, the size of the typical seed round has more than doubled over the last 5 years (KPMG - Venture Pulse Q4 2021). This means that startups have more money, relatively lower costs, and thereby more time to grow before having to raise their next round. Ultimately this leads to a larger share of value captured by those early financing rounds and at this stage founders are increasingly looking for investors that can provide access and expertise next to “simply” injecting capital. 

This gives new types of investors an opportunity to enter the market. As mentioned in our previous post ‘new kids on the block’, there is a proliferation of investors across all stages and with different strategies and focus areas. More and more funds with sector, geography, or stage focus, more solo GPs, and also new syndicates are popping up on a daily basis. Their differentiation gives them the opportunity to offer founders more than just capital. And this holds  true for many private asset classes apart from just venture investments.

The complexity of private markets

However, private markets still have many obstacles that make it very difficult and painful to invest in alternative assets.

This is especially true for collective investing & setting up investment entities. Not only is it very expensive to set up entities and manage them over time, as you need to manage all stakeholders from lawyers and coinvestors to tax advisors separately. But the process is also incredibly analog, intransparent, and time-consuming, with lots of bottlenecks. We believe that there is still plenty of room to grow due to the above mentioned reasons which will in turn offer a) a higher percentage of capital that investors are willing to allocate to private assets and b) decreased risk associated with investing in these assets.

We want to change this.

As the tech ecosystem expands at an unprecedented rate, we want to open up access to more people, by allowing investors to open simple, clear-cut, standardized investment entities that can be managed fully digitally to significantly reduce setup and management complexity and costs. bunch aims for the democratization of access to private markets and we are on a mission to make the life of those who are building or financing the future 10x easier. 

Read more about our product offerings here.

We are excited to keep you posted throughout our journey to build the operating system for private market investors. Public markets have already seen drastic improvements from the time when you had to call your bank to make a stock investment and high fees restraining most people from entering the market. But this has not happened for private market investing yet and we want to take out the friction and free up time for fund managers, investors, and founders to support any projects tackling the challenges of tomorrow.

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