Only 2% of the world’s accredited investors have legal access to the world’s private markets. Launched in 2020, Linqto offers a technology-driven platform that addresses this issue by providing a fluid investment environment. This gives him a 98% chance of investing in unicorns before they go public.
in a conversation with fintech futuresLinqto’s COO, Joe Endoso, discusses the ideas behind the company, how the platform works, and what they ultimately hope to achieve.
Joe Endoso, COO of Linqto
FinTech Futures: What inspired you to launch Linqto?
Joe Endoso: It was really two basic things. One was the philosophical understanding I gained from working with cryptocurrencies. This is the power offered in terms of the nature of blockchain technology, the decentralization inherent in its architecture, and the ability to enable more direct peer-to-peer relationships and transactions without encryption. The advantages of traditional centralized intermediaries that are powerful forces of change. Many current industries, especially the financial one where I come from, are completely dependent on centralized counterparties for their market structure and ability to trade. That philosophical idea is a very powerful one, and one that I incorporated into his Linqto, which is now guiding us as we begin to evolve our platform towards blockchain.
And the other is that I’ve been in the private space as a banker and as a start-up entrepreneur, and this tremendous value creation engine that makes up the private market, especially the private technology companies, is what drives all innovation today. What happens in the global economy is inaccessible to the general public for the most part.
So this idea of democratizing that sector by opening it up to the public to invest in it is a powerful idea and fits nicely with this concept of decentralization inherent in blockchain. I was.
How does the Linqto platform work?
From a back-office perspective, it was very important to be institutionally robust.
But at the same time, the front end had to be simple and easy. Trade restricted stock in the usual way. So it was important for us to be able to use technology to provide a very simple, easy-to-use, and relatively affordable interface.
Visit our website or download our app and literally in minutes you can trade and access a wide variety of investments. All 23-30 companies are high quality, privately held technology companies invested with their own capital. Because this is a very peculiar aspect of our business model.
We initially invest our own capital, make investment choices, and do all the work necessary to complete those investments. Then, after making and closing investments, we expose those investments for participation by smaller, accredited investors.
So it’s not a model of collecting other people’s money and using that money to get paid to deploy that capital. Rather, we deploy our capital and simply allow others in if they wish. if they want.
No one feels indebted to us or asks us to invest. There is no membership fee and no financial incentive not to invest. So you come to our platform as a free agent. that’s not your problem.
And the affordability part comes with the fact that we effectively divide these investments, allowing a minimum of $10,000 to participate.
However, by qualifying in your home country, you can join our platform as a qualified investor under your home country scheme and invest for as little as $10,000 per pop. This is significantly lower than the institutional market, which largely defines and dominates the private space today. You can imagine that this is not something the average person does with their investments and is not a market they can participate in.
What is the process for selecting companies to list on the platform?
The driving idea here is that more and more modern economies are focused on technology, and technology will become the primary driver of value creation in the economy.
In the last earnings call from Microsoft, I think Satya Nadella said something like she expects 50% of GDP spending to be spent on technology over the next decade. Looking at such broad themes, what they convinced us is that unless we have infinite capital, we will focus on technology. value creation takes place.
Linqto platform launched in February 2020
First, we focus on private technology companies. We are not there for anything else. Then, within technology, identify the sectors or verticals that seem most attractive. This is due to the fact that they represent the largest market disruptive technology innovations available. Here we have an opportunity to fundamentally disrupt and reshape many existing industries like the one I came from, such as capital markets.
And for the sake of selection, we try to focus on specific companies within those target industries that we want to invest in. What we are trying to achieve is what I call the optimal risk-adjusted return. .
Therefore, we are not looking for the highest absolute return that would drive us towards an early stage investment. We are trying to balance absolute return and risk.
By risk, the two main factors are investment horizon and return volatility.
We reduce them by focusing on companies with characteristics associated with mid- to later-stage technology companies rather than early-stage technology companies. Then you have to select a company and find a deal. this is another thing.
This is different than the public stock market where I just run tests and go to market and run. It’s not automatic because you have to figure out how to get into these companies. How do you get their stake? It’s not easy. You need to connect with them and some of their key finance team and get an allocation to their primary equity round. Access to shares.
How many companies and investors are currently on your platform?
Since launching the platform in February 2020, we have made 42 investments so far.
We recently surpassed the threshold of 50,000 members worldwide with our platform, investing a total of over $125 million in active members.
How are you planning to move to a decentralized platform?
We are in the technology development stage.
One of the lessons I learned from my previous experience was that you can build the best products in the world. Embrace technology and use it productively.
We didn’t want to be in that position at Linqto. What we’ve done is build a product, put it on the market, and make sure there’s actually a market ready for it.
With over 50,000 members, now is the right time to move the platform to blockchain. A market where we can make money.
We are currently in the process of obtaining a license from US regulators to allow us to operate a so-called Alternative Trading System (ATS). This gives current investors the ability to liquidate and monetize their investments on the platform before the underlying companies they invest in actually go public.
For people like us, illiquidity can be a problem. Because life events influence investment decisions and you need to secure liquidity sooner than you think. So the ability to turn around and liquidate that investment without necessarily waiting for his IPO is very important and we want to give them that right. And this platform does just that.
We plan to launch this platform in the next few months in a fairly traditional way, i.e. not on blockchain, but eventually on blockchain as we tokenize every investment unit that people currently hold. The idea is to move to And effectively allow trading on blockchain-based exchanges.
What’s next for Linqto’s pipeline?
So far, we have focused on investing in private technology and simply expanded the scope of companies we invest in, giving our members more choice to choose from.
I think another important development is democratizing the private space. So they can go to our app or website and offer us $150,000 worth of stocks and we will sell those stocks. are purchased from them.
What Linqto can ultimately do is change the structure of private markets by enabling this vast number of people to become a force in that market through capital. they are not today. we’re going to make them