What Is Republic?
Along with StartEngine and WeFunder, Republic rounds out the big 3 of equity crowdfunding platforms. Equity crowdfunding is a fast-growing space that allows investors to buy shares of startups, local businesses, and other assets.
Investing in startups offers investors huge potential upside. Imagine being able to invest in a company at a $10M valuation that later IPO’s at $10B. However, there are some difficult downsides as well.
Liquidity Limitations
One of those downsides is that startups fail far more frequently than their public market counterparts. The other is the time horizon of the investment. Even if a small startup blossoms and grows into a highly-valued behemoth, it could still be 5, 10, or even more years until there’s an exit opportunity. In other words, startup investments have poor liquidity. The main way that crowdfunding platforms can provide liquidity is through “secondary markets.”
When investment offerings are listed on these platforms allowing for new equity to be purchased, these are “primary” offerings. It’s an exchange by the company raising funds and the investor, with the investment platform facilitating. Secondary markets are different – they allow for the purchase and sale of existing assets between investors.
Does Anyone Else Have A Secondary Market?
StartEngine was the first platform to try their hand at a secondary market. They have a marketplace where trades execute for limited hours during the day.
At one point not too long ago, StartEngine’s secondary market was populated by two or three companies. It wasn’t many, but there were real shares from real startup companies exchanged between investors on the platform.
However, their secondary market now only lists shares from their collectible offerings under the “More Companies to Trade” section of the website. Trading of those offerings is also not universally available. As a resident of California in the United States, I’m greeted with a message that reads:
This company is temporarily unavailable to trade in your region, StartEngine is actively working on making this available to trade. Please stay tuned for updates!
– StartEngine secondary market listings page
Republic’s Secondary Market Beta (US)
Given the incomplete nature of StartEngine’s secondary market, it’s unclear what is realistic to expect from Republic. At the moment, it sounds like they have a solid framework for the initial beta.
Here’s a brief rundown of how things work:
- Buying is only available to accredited investors in the US
- Selling is available for any US investor with a US bank account
- Buying and selling on the secondary market is restricted to Crowd SAFEs
- It is somewhat ambiguous if there are any other restrictions, such as only being able to buy or sell SAFEs for specific companies.
- You have to apply for and be approved for access the beta
For US investors, head over to republic.com/market to apply for access.
It’s unclear if the images are just for marketing purposes, but references to the following companies can be found on the page:
- LUPii
- Hydro WInd Energy
- Manta Biofuel
- Storybook App
- American Provenance
- Delivered Now
- DigiBuild
- Down To Cook
Visit the new market page to learn more.
It’s Different In Europe
Republic’s European presence comes from their previous Seedrs acquisition. Perhaps unsurprisingly, things will work a bit differently for European investors.
First, Republic provides a different link. From this marketplace page, we can see that there are 21 days until the market opens. It also shows a list of dozens of companies such as Revolut, Republic itself, Paysend, TransferGo, Bux, and a whole lot more.
The marketplace page also has a link to learn more about how it works.
Investors can put in sell orders at any time. However, buy orders can only be placed when the market is open. Unlike the stock market, the Republic/Seedrs marketplace has some irregular hours. It will be open for one week of every month starting at 11 AM on the first Tuesday of that month.
Buyers will have to pay a 1.5% transaction fee. Sellers have to sell at least £/€10, but not more than £/€25,000.
Check out the how it works page to learn more.
Conclusion
A lot remains to be seen of how Republic’s secondary market will shape up. However, even the quiet launch of beta signups is an important step forward.
Liquidity is undoubtedly one of the biggest considerations for making startup investments on equity crowdfunding platforms. The focus on building a secondary market shows Republic is well-aware that this is an important barrier to entry that needs to be torn down.
Hopefully, this is just the start of improved liquidity – not just for Republic, but across the entire equity crowdfunding industry.
