EquityZen Users Community/Investor Experience/Brokerage Platforms
EquityZen vs EquityBee
This article is dedicated to finding differences between two popular platforms for making investments in the secondary market, EquityZen and EquityBee.
History of Platforms
COMMON features of broker platforms
Platform DIFFERENCES
Registration on platforms
Types of deals and listed companies on platforms
Order of the listing
Fines and fees of the platforms
Investment process
Pros of EquityZen
History of Platforms
EquityZen
EquityZen was founded in 2013 by Atish Davda, Sriram Bhashyam, and Phil Haslett in New York. With offices in New York and Atlanta, EquityZen has over 260k shareholders and investors worldwide, with over 29k investments closed to date. More than 350 companies with a combined estimated market capitalization of $1.13t have also been served.
EquityBee
EquityBee is an alternative to EquityZen and was founded in 2017 by Oren Barzilai, Oded Golan, and Modi Radashkovic. EquityBee was originally based in Tel Aviv, Israel. In 2019, the company’s headquarters moved to Palo Alto, California. The EquityBee investor community, which includes qualified investors and family offices, has grown by over 430% to reach 12k investors in 2021.
COMMON FEATURES OF THE TWO PLATFORMS
- The presence of Watchlist, which allows you to track news on the company of interest.
- A website commission. For EquityZen, investments up to $500k are subject to a 5% tax, investments from $500k to $1m are subject to a 4% tax, and investments of $1m or above are subject to a 3% tax. For EquityBee, the investment cost is 5%+ VAT on financing the transaction. When profiting from a deal, investors also pay 5% + VAT.
- Minimum investment size of $10k. However, for EquityZen the following minimum investment scheme applies: The first trade will cost investors $10k (discount for newcomers); then, for 2–5 trades, the stock price will be $20k. After the 5th trade the minimum investment will also be $10k again (discount for regular investors).
- No preliminary guaranteed booking of transaction; instead, there’s a “soft commit” — a situation in which the investor can temporarily reserve the deal without prepayment. Before the “hard commit”, the investor may refuse to pay for this deal in the future without penalties.
DIFFERENCES BETWEEN THE TWO PLATFORMS
Registration
EquityZen
Once you need to fill out KYC and provide the following information about yourself:
- Full name;
- Type of investment profile;
- Individual or institutional investment;
- Citizenship.
For a simple individual investment, you will also need to provide your status (individual investor, qualified buyer, trustee), address, bank information, and investment plans and preferences as well as take a test about your understanding of the risks of investing in the secondary market.
After registration, each user of the platform receives a personal manager who accompanies deals and answers questions by email.
EquityBee
As part of KYC, to create a profile and participate in transactions, you will also need to fill in the information about yourself that the platform requires.
To do this, you will need to confirm the status of an accredited investor, enter your personal data, accreditation and experience in investing.
After registration, each user of the platform receives a personal manager who accompanies transactions with a personal phone call.
Types of Deals and Listed Companies
EquityZen
The platform offers three categories of offerings:
- Shares of individual private companies (single-company funds),
- Portfolio investments (multi-company funds),
- Direct purchase of shares.
Single Company Funds: You invest in the EquityZen fund, which purchases shares of a specific company.
Multi Company Funds: You invest in multiple companies at the same time through the EquityZen investment tool.
Direct Share Purchasing: EquityZen facilitates the purchase directly between the company and investors.
Sellers of shares can be equally investors or employees of private companies.
EquityZen users can also resell shares to each other within the EquityZen express deals.
EquityBee
EquityBee does not work with stocks, but with options. The platform connects startup employees (sellers) with investors to provide option holders with the funding they need to exercise their options.
So, thanks to EquityBee, startup employees can get the money they need to exercise stock options before those options expire.
The investor, in turn, pays for the options and gets the right, after the company goes public, to compensate the amount of costs + interest (and sometimes part of the shares).
Accordingly, the employee (seller) remains the owner of the options until the liquidity event occurs.
All or some of the employee’s options may be available for redemption.
A new investment vehicle is available from August 18, 2022: EquityBee Liquid offers. With this option, investors gain the direct access to top-tier startups by purchasing employee shares directly.
Listing Order
EquityZen
New deals open every Tuesday and Thursday at 12:00 PM ET. If a company is added to the user’s Watchlist, information is sent to the mail in advance, indicating that a listing is planned or has just taken place. Allocations for the best deals are reserved in the first few minutes (or even in just 1 minute).
EquityBee
Every Monday and Thursday at 8:00 PM ET, investment opportunities are updated and users are notified by email or SMS about them. Hot deals fall into different categories: “New” and “Last Chance” (deal closes soon). Trades are usually available within 30 days; however, the best options are paid back within 48 hours.
Fines and Fees
EquityZen
If, after a soft commit (a Term Sheet signing), the investor confirms the submission via a hard commit (Submission) and does not pay for the deal, a fine of $500 will be charged to him.
EquityBee
After the first confirmation of submission by phone or mail, the investor has the right to refuse to participate in the deal without penalty. That happens because there is an oversubscription for most deals, so the amount required to close the allocation is collected in any case (without cons to EquityBee). However, regular reservations with failures are fraught with the blocking of your profile on the platform.
Investment Process
EquityZen
To make a deal on EquityZen, an investor must do the following:
- Near the deal of interest, click “Invest Now” — “View Deal”
- Select the amount of investment and click “Reserve Investment”
- Enter information about yourself and sign the documents that EquityZen requires
- Wait for the results of the ROFR procedure
- Pay for the transaction by details and confirm your transfer
- Wait for EquityZen to confirm receipt of payment
- If the transfer is successful, the transaction goes directly to the “Closed Transactions” section
EquityBee
To make a deal on EquityBee, an investor must do the following:
- Near the deal of interest, click the “Invest” button
- Click “Reserve Your Allocation” directly on the deal page
- Select the desired amount and click “Reserve Allocation”
- Wait for the approval of the application (you can wait for approval by mail or constantly monitor the status of the application in your personal account)
- On the submission page, sign the documents that EquityBee requires
- Transfer the money
- EquityBee makes a transfer of your money to the company funds
- Wait for the moment, when options are exercised on shares — liquidity event
Pros of EquityZen
- Opportunity to invest in Pre-IPO deals with a small check.
- Access to shares of the private companies (EquityZen investors are not included directly in the Cap Table, but they own a certain part of the shares of the company).
- The platform is open to investors from all over the world, which means that not only Americans can trade on EquityZen. The investor’s sole task is to confirm their accreditation status.
- Possibility of portfolio diversification. EquityZen offers investments in funds that may include 4 to 25 companies in a single deal.
You can join the discussion about EquityZen deals, Pre-IPO, and the secondary market in the closed Discord group:
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Have successful investments through EquityZen and EquityBee!
