Business use-case: Shrinking public markets/growing private
Public markets in the United States have been shrinking for the last two decades. There were ~8,000 securities listed on NASDAQ and NYSE in the mid-90s. With an increase in GDP, population, business investment, and technological advancement, one would expect that today listed securities would have increased to ~20,000. On the contrary, it’s fallen 50% to ~4,000. There are many reasons for this decline, but all lead to the same conclusion: public markets cannot cater to large swaths of today’s economy.
By contrast, private markets — consisting of private equity, private credit, real estate, infrastructure, and natural resources combined — have been expanding at a phenomenal rate. The total AUM of the private markets has exceeded $5tn today and is expected to double by 2030.
Why? There are fewer incentives to list. Companies are choosing to stay private longer because of direct access to private capital, and rising operating costs and regulatory exposure of being a public company. This is supported by the asset growth in private equity and venture capital industries, unlike previous economic cycles. As well, the increased number of mature companies focusing on Corporate Venture Capital to supplement diminishing earnings and organic growth. Whereas more public companies are pursuing share buybacks or simply delisting (especially on the smaller end).
But — liquidity in the private markets remains a challenge. The barriers to entry for investors are high, the discovery of opportunities is inefficient, and as a result, accessing capital markets for issuers is a challenging and expensive journey (from both time and cost perspectives).
The numbers tell a very strong story here. As the private markets continue to grow, it echoes a very similar need for ‘public market’-like liquidity. No surprise, liquidity providers in the private secondary markets such as Nasdaq (NPM) and “elite boutiques” (eg. Greenhill) have posted larger and larger volumes year after year. While traditional investment bankers (like PJT Partners) are making big strides in private secondaries from the tech approach (link). This year alone, the secondaries industry estimates in excess of $90bn worth of volumes.
The assets in these private markets are not built for a ‘traditional’ exchange (i.e. with Board of Directors and traditional operating functions), instead, they are more asset-heavy or asset-specific. So how can firms monetize these private stakes or privately-owned assets? The traditional approach would involve a strategic buyer or securitization; however, you need a new generation of exchange to cater to these new needs. As private markets grow, there is a need for a more efficient primary, as well as a secondary marketplace for private securities, working on the same principles as a stock exchange.
Tech use-case: Internet of Value
Through the advent of the Internet, emails changed the way how information was relayed: internationally, in a click of a button, programmable, and in mass amounts. Similarly, through the advent of the Internet, blockchain has enabled the creation, management, storage, and transfer of assets that are natively digital. These natively digital assets, when legally backed by real-world assets (let’s say, private market securities), can garner the similar technological benefits of a cryptocurrency.
That is, these securities-backed digital assets (also called securities tokens or coins) can then replicate similar technological benefits of Bitcoin and other cryptocurrencies. This leads to a pathway for securities to be natively digital and can be relayed in a similar manner like an email (internationally, in a click of a button, programmable, and in mass amounts). Blockchain-based digital assets hence enable the creation of securities that is as seamless as emails.
This process of creating a natively digital asset on the blockchain and backing it legally with real-world assets/securities is called tokenization and the digital assets created are known as tokens or coins.
Tokenization of securities will lead to more efficient capital markets with less counterparty-trading risk, enabling faster and cheaper issuances, settlements, and back-office processes. It will open up trillions of dollars worth of assets and on the other side, a large amount of capital/number of investors, both of which previously locked due to illiquidity, expensive processes, and higher barriers to entry in traditional capital markets.
Polybird is a platform where you visualize the business and tech use cases combined, as described above.
We are a global marketplace for securities tokens, for securities that are within the private markets — and are not pubic yet. We envision that one day, issuers from all over the world (such as small/medium businesses, real estate & infrastructure projects, governments, financial institutions, etc.) will have access to private capital markets for raising funds. And for our investors, immediately post-raise, a platform for seamless buying and selling of tokenized financial instruments on Polybird.
This is the big promise of securities tokens and securities tokens offerings (STOs): global offering, democratized investor base, liquid securities, deeper engagement with “community” / users, automated compliance / messaging / reporting, instant settlements, more transparency, minimal intermediaries, more automation, more digitization, etc.
The shrinking markets for legacy exchanges and their unique structure, give ‘us’ the technological edge to offer listings across a wide number of assets, meeting needs unaddressed by traditional exchanges.
While there’s an argument that these can be done without the blockchain, the advantage of doing it on the blockchain is the minimal to zero need for various intermediaries previously required to issue, manage, store, track, transfer, report, and clear securities (collectively “infrastructure intermediaries”). With a reduced need for intermediaries, tokenization decreases associated costs and time, increases automation and digitization, thereby, decreases the barriers to entry to capital markets.
In summary, it can be said that the infrastructure intermediaries, previously needed to ensure trust in the securities industry, are now obliterated by the use of blockchain. ZING! These benefits are already available to public market securities but come at a tremendous cost, time, and regulatory exposure. In one way, on Polybird, issuers will get exchange-like/public-like benefits, while remaining private and in many cases, relatively small.
What’s the difference between a public market and private market security? Well, that’s a story for another day, which I will be posting as well for the benefit of our issuers (stay tuned to our blog!).
Industry-leading Regulation and Compliance:
Through our affiliate, we are licensed in the United States via AX Trading LLC which is a registered Broker-Dealer/ATS and a member of FINRA/SIPC. AX Trading is a world-class fin-tech team that previously sold Bonds.com to the London Stock Exchange Group, is an investee of Credit Suisse and is partnered with NASDAQ and Euronext stock exchanges.
Benefits to clients (Initial Marketplace Offering + Liquidity)
Polybird is a global marketplace for securities tokens for companies to access private capital markets in a seamless manner. Issuers can issue tokens to raise capital and post-issuance, tokens can be traded on the platform (minus any lockup period). Issuers can also list existing tokenized products on Polybird.
When you partner with Polybird, you are not partnering with a traditional exchange. We offer you the opportunity to raise capital or monetize traditionally illiquid assets. Our process is seamless, from the first call to legal to listing, and what we can offer you is equally unique and customized. We aspire to help our clients raise $1bn in our first year.
Management and Advisors
Polybird is led by three co-founders. Abhijit, James, and I (Harish). Abhijit is our tech lead, James is our deals lead, and I am primarily into deals and business development. We are all in our 20s, full of young passion, energy, focus, and enthusiasm. Before starting Polybird, I was an Economist at Barclays and saw the vision of digital assets upending Wall Street. So I quit Wall Street to start Polybird and got VERY lucky to meet Abhijit and James in the journey who agreed to join Polybird as cofounders.
We are also advised by several veterans from Morgan Stanley, academia, and leaders from different aspects of the global financial services industry. You could find more about us here.
Let’s get the conversation started…
We are building a marketplace for private markets, on the blockchain. Over time we’ll realize which illiquid assets make sense to be tokenized and which doesn’t. We have signed a number of agreements and LoI and are accepting listings, both pre-STO and post-STO. You can directly email me at email@example.com to get the conversation started with the team.