Aboutique investment bank is looking to open to the crowd the often opaque process of taking companies public.
First Line Capital has launched IPO Village, a site that allows regular investors to buy into initial public offerings at the kind of pre-open prices now reserved for investment banks’ biggest clients and for institutional investors. The idea is to apply crowdfunding tools to IPOs.
“You’re going out there, you’re going into a village square…and you essentially scream to the village that you’ve got shares to sell,” First Line founder Simon Erblich told me. “That’s what an IPO was meant to be.”
Potential investors register on the IPO Village website, then get a shot at buying an allotment of shares at the price set when that company goes public. The change is that those shares are now normally offered to large investors, who then can sell or hold them when a company actually begins trading on a public exchange.
First Line doesn’t have to wait for new rules to kick in allowing crowdfunding for equity in order to launch IPO Village, since it’s selling shares in public companies. The SEC is expected to approve rules for private companies to sell shares online to raise up to $1 million. The companies First Line takes public usual raise between $1 million and $10 million.
“Ten years ago, we started dreaming of doing this online,” Erblich said. “All we needed was a medium that worked—that was viable.”
Sites such as Kickstarter and Indiegogo that have allowed artists and startup companies to raise money in return for products or other consideration are almost commonplace. Those crowdfunding sites make money by taking a percentage of the cash raised in campaigns. First Line keeps a percentage of the companies it takes public, which is made more valuable the more valuable the company becomes when it goes public.