Posted by Thanks to blockchain technology, it has become possible to fragment shares in private companies. Using the Ethereum blockchain protocol and associated legal structures, pre-IPO shares have already been issued for large private companies such as SpaceX and Airbnb.
Sergey Kondratenko, an expert in the field of fintech, argues that this innovative technology significantly reduces the threshold for entering the private equity market. It allows all individuals and investors to invest with a minimum entry fee of 100 euros. Let’s take a closer look at the market dynamics and opportunities to leverage innovative pre-IPO financing technologies.
Sergey Kondratenko is a recognized specialist in a wide range of e-commerce services with experience for many years. Now, Sergey is the owner and leader of a group of companies engaged not only in different segments of e-commerce but also successfully operating in different jurisdictions, represented on all continents of the world. The main goal is to drive new traffic, create and deliver an online experience that will endear users to the brand, and turn visitors into customers while maximizing overall profitability of the online business.
Private financing of a company: Pre-IPO as a unique alternative to stock exchange placement – Sergey Kondratenko
Pre-IPO is a form of attracting investment, which consists of the private sale of a significant part of the company’s shares before entering the stock market. The essence of this stage is similar to the funding round required for an IPO. According to Sergey Kondratenko, any private company can conduct a pre-IPO. At the same time, it maintains its private status and continues to attract investment without the need to become public.
The expert believes that for enterprises this is a profitable method of attracting capital for sustainability and subsequent development. It bypasses various costs and complications associated with the IPO process. First of all, to become a public company, you need to spend several years preparing together with financial and legal advisors. To successfully conduct a public offering, a company must create a dedicated IPO team, develop an issuance strategy, plan and execute publicity campaigns, also known as roadshows, and undergo ongoing external audits.
Because of such difficulties, many private investment firms prefer to maintain their status as long as possible, focusing on the internal development of the company, notes Sergey Kondratenko. This is especially true for startups that are just gaining experience and practical skills in financial development, but at the same time are rapidly developing their potential. In turn, innovative financial technologies and platforms provide investors with the opportunity to invest even small amounts for the future.
Proving that pre-IPO investing is often considered a viable option for startup investing, well-known startups such as fintech service Klarna, innovative artificial meat manufacturer Impossible Foods, space corporation SpaceX, and many other exciting ventures. Investing in the stock futures of these already successful companies allowed investors to participate in the growth of asset values before they hit the public market and earn millions in profit.
Sergey Kondratenko: How are fintech startups using alternative financing methods to strengthen their pre-IPO position?
According to the expert, fintech startups can use various alternative financing methods to prepare for an IPO. They can help them strengthen their financial position and increase the company’s value. Here are some popular methods that Sergey Kondratenko suggests taking into account:
- Venture funding:
Series of investments. Fintech startups can raise funding through multiple rounds of venture capital. This allows them to develop gradually and attract large investments from various investors.
- Private Placements:
Attracting investments from major players. Firms may offer private placements to institutional investors, foundations or large private investors to raise significant funds.
- Corporate bonds:
Issue of bonds. Fintech startups can issue corporate bonds, raising funds from investors in exchange for a commitment to pay interest and repay principal in the future.
- Credits and loans:
Loans from banks. Fintech startups may seek debt from banks or financial institutions to obtain the necessary resources to prepare for an IPO.
- Corporate investments:
Strategic investments. According to Sergey Kondratenko, attracting corporate investment from large companies in the same industry can not only provide financing but also create strategic partnerships and growth opportunities.
- Sovereign Investment Funds:
Investments from sovereign wealth funds. Some countries have sovereign wealth funds that can invest in technology start-ups, helping to develop innovative industries.
- Crowdfunding:
Equity crowdfunding. Fintech startups can use crowdfunding platforms to attract investment from the general public in exchange for a stake in the company.
- Bonds with the right of conversion (Convertible Bonds):
Attracting investments with a conversion option. Companies can issue bonds, giving investors the option to convert them into shares under certain conditions.
Sergey Kondratenko believes that these methods can be used by fintech startups individually or in combination. Here everything depends on the capabilities of investors and the ambitions of the company; the main thing is to ensure sufficient financing and effectively prepare for the IPO.
Blockchain and artificial intelligence as methods of optimization and efficiency of Pre-IPO
Fintech startups often use emerging technologies such as blockchain and artificial intelligence (AI) to streamline the IPO preparation process. Here is an analysis of how these technologies can be used, from Sergey Kondratenko:
Blockchain:
- Digital securities. Fintech startups can use blockchain to issue and manage digital securities. This method increases the transparency and security of share ownership and simplifies the processes of accounting and transfer of securities.
- Voting management. Blockchain can be used for more transparent and secure shareholder voting, reducing the risk of fraud and increasing investor confidence.
Artificial intelligence:
- Data analytics. Using AI to analyze large volumes of data helps predict market trends, assess risks, and optimize IPO strategies.
- Process automation. Sergey Kondratenko believes that fintech startups can implement automation using AI to improve the efficiency of IPO preparation processes. For example, to prepare financial statements or collect documentation.
Cybersecurity:
- Data security. With the increase in the amount of digital data associated with IPOs, fintech startups are actively using blockchain and AI technologies to ensure security and protect confidential information.
Smart contracts:
- Automation of agreements. According to the expert, fintech startups can use smart contracts on the blockchain to automate and simplify agreements with investors. This reduces the time and resources spent on legal formalities.
Internet of Things (IoT):
- Asset monitoring. Using IoT to monitor a company’s physical assets can ensure accurate financial reporting and improve transparency for investors.
Cloud technologies:
- Data storage and processing. The use of cloud technologies allows fintech startups to speed up the processing of the necessary information and also provides access to data from anywhere, which is useful in the process of preparing for an IPO.
Sergey Kondratenko emphasizes that combining these technologies allows fintech startups to reduce costs, increase transparency, and ensure effective management of the IPO preparation process. This innovative approach can ultimately lead to a more successful entry into the public market.
