Linqto is giving employees at tech companies preparing to go public increased liquidity through its new initiative, Linqto Buys Shares. The platform features few fees and will let investors get in early with private tech companies before they go public.
In addition to providing added liquidity to employees in private companies through Linqto Buys Shares, Linqto is working toward becoming an alternative trading system (ATS) by moving its currently centralized database to a decentralized database on the blockchain.
By decentralizing, the assets Linqto currently offers investors will eventually be tokenized or digitized, and can then be traded on blockchain exchanges to provide even more liquidity to investors. Linqto also has plans to delve into the NFT space by offering free NFT awards to users based on achievements they earn on the platform, such as membership length milestones or for reaching investment goals.
According to Linqto COO Joe Endoso, the goal of the app and the new Linqto Buys Shares initiative is twofold: to give employees with stock in a company preparing to go public added liquidity by providing a platform for them to sell their shares, and to give individuals an opportunity to invest in private companies with as few as $10,000.
More often than not, large corporations with plenty of capital are the only entities who are able to make second-market trades, and employees in these tech companies who might've been compensated in shares have to wait years before they see a profit. Linqto is working to change that.
"[Second-market trades are] something that happens all the time out here in Silicon Valley, but it's really clubby. You have to know people, you have to have the secret handshake, and if you're not a part of that, you're kind of out. And, specifically, if you're not an institution with big bags of money, you're definitely out," Endoso told ZDNet.
Linqto is trying to give individual investors the chance to make a risk-adjusted return on trades they typically wouldn't have access to by allowing them to invest in pre-IPO tech companies. And with Linqto Buys Shares, employees in private companies have the chance at liquidity.
Endoso said a lot of the time, the value of tech companies is created while they're still private, so it might be too late to invest once the company goes public to ensure a solid return.
Currently, the minimum investment is $10,000, but as the app goes through iterations and the company scales, Endoso said that number will decrease. The app doesn't require any subscription or membership fee. Instead, Linqto will increase the price of the stock based upon operating costs, research expenses, and other factors. Linqto will then offer users the stock at that grossed-up price.
So, what might normally be a $30 stock, might cost $32 on the app. However, once that's paid, there are no other fees users need to worry about. Once a user signs up and gets verified, they can begin investing.
The companies that get added to Linqto's buy list go through an extensive screening process and have to meet several criteria before being included on the app. Linqto focuses on risk-adjusted investments, meaning companies that are scalable, profitable, and have strong leadership in place. And while riskier plays can yield a higher return, Linqto is providing its clients with a more dependable way to grow their wealth.
"We don't like companies that have a story that's built on, 'We'll start making money when we're the number one player, when we've basically killed everyone else off in the sector.' That's not our play," Endoso said.
Linqto evaluates tech companies by identifying the impact they may have on the sector, the length of that impact, the strength of their team, client base, revenue stream, and the scalability of the business. Linqto applies technical analysis and human intelligence to figure out how much the potential company is trading for on the secondary market.
If the company is vetted and added to Linqto's buy list, shareholders in that company can sell their shares to Linqto. Linqto will purchase the shares using a special purpose vehicle (SPV) and offer ownership units of the SPV to investors on its platform. If the investor likes the trade, they can buy, and that's it. The next investor in line will then be placed on a waitlist. If the investor decides not to buy, the next investor in line will then have an opportunity to.
"Today, we have upwards of 38,000 users on the platform. Since we've launched, we've aggregated over $112 million in small ticket capital from our users, and we've invested in close to 45 different tech companies. We've had six exits already in our short life: Coinbase, Robinhood, SoFi, Marqeta, NerdWallet, and Innovium. And we've probably got another five or six companies in a portfolio today for when an ideal market window opens," Endoso said.
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In addition to providing long-term wealth, investing can be a great way to combat rising inflation. If you find an investment with a higher return percentage than the current inflation rate (measured at 8.5% in March 2022), it could help save money in the long-term. This is especially true if your savings account is only earning the average annual percentage rate (APY). According to the Federal Deposit Insurance Corporation (FDIC), that's a measly 0.06%.
That said, it can be hard to choose the next innovative tech company to invest in to guarantee a strong return. There is inherent risk when investing, but companies like Linqto can help prospective investors make better-informed decisions.
"At the end of the day, the best antidote to a higher inflation rate is an even higher rate of return on your investment," Endoso said.
Currently, Linqto Buys Shares is only available to a select number of Linqto users, but it'll open to more as the initiative is fine-tuned. Investments, however, are available to anyone who wishes to use the platform.