DB1 Ventures helps Caplight connect pre-IPO markets

The market for private company stock is large, but fragmented

A frequently cited report by Industry Ventures estimates the global pre-IPO secondary market has grown more than fivefold over the past decade, surpassing US$100 billion traded annually. This growth has led to the emergence of a large, but inefficient and opaque marketplace. Hundreds of siloed broker-dealers compete to serve hundreds of thousands of investors and private company shareholders, matching buyers and sellers to facilitate liquidity pre-IPO.

DB1 Ventures, the venture capital arm of Deutsche Börse Group, identified the growth opportunity in the pre-IPO market early and has been at the forefront of investment in this space.

Aggregated private market data and liquidity on one platform

Caplight, a DB1 Ventures portfolio company, connects all of the pieces of the pre-IPO secondary market by combining private equity transaction pricing data with a network of hundreds of brokers who can help end clients buy and sell in the private secondary market.

Brokers join the Caplight network by contributing their secondary market transaction data in exchange for access to the aggregated data platform and Caplight's brokering tools. Since launching in 2022, Caplight has aggregated over US$300 billion of secondary market transactional data. Brokers on Caplight's platform include bulge bracket investment banks, secondary market platforms, and independent boutique brokerages that focus exclusively on pre-IPO.

Institutional investors subscribe to Caplight's platform to receive best-in-class private market transaction data and valuation analysis tools. Investors use Caplight to value their existing private company investments, either by using the platform or embedding a data feed via Caplight's API. Investors can match with the private market brokers on Caplight to buy and sell in the pre-IPO secondary market.

Caplight's subscriber base includes large asset managers, hedge funds, venture capitalists, and private equity funds.

Using private market data for innovation

Caplight has created a flywheel between its data and trading tools. Investors subscribe to the data platform and eventually match with a broker to buy or sell private company stock. This transaction data feeds back into the data product, increasing the data set and making it easier to attract additional investors who continue the cycle.

Caplight licenses these unique and proprietary data to issuers who use it to create novel financial products that track the pre-IPO market. The company's goal is to power index and derivative products that make it easier for investors to access the pre-IPO asset class, and manage their private equity risk. Therefore, Caplight explores the possibilities of working with Eurex, one of the leading derivatives exchanges globally and part of Deutsche Börse Group. More data and liquidity in private markets should attract more institutional capital to the space, allowing private technology companies to continue to innovate.

"The Caplight platform is highly complementary to Eurex, where our focus is on listed derivatives trading based on public markets, Caplight covers OTC secondary market derivative transactions with a heavier focus on pre-IPO companies which tend to operate from the US. This foothold in private capital markets is significant when considering the challenging backdrop that European exchanges face with respect to lower IPO activity," said Zubin Ramdarshan, Head of Equity & Index Product Design at Eurex.

Aligned with Deutsche Börse Group's commitment

Deutsche Börse's investment in Caplight aligns with its broader vision of shaping the future of capital markets through innovative solutions. As public market experts, Deutsche Börse Group is particularly well-equipped to be not only a capital partner but also a strategic design partner as Caplight looks to replicate the efficiency of public markets in this novel space. This partnership is a testament to Deutsche Börse Group's commitment to driving efficiency, transparency, and connectivity in the financial markets.