Investing in Bitgo | How to Buy Pre-IPO Shares

Bitgo is a cryptocurrency solutions provider that offers custodial, trading, lending, and other DeFi (Decentralized Finance) services to clients. The company has successfully carved a niche in the market as one of the first protocols to primarily focus on institutional investors. This strategy has proven fruitful. Today, Bitgo has over 1,500 institutional clients and remains a pioneering force in the digital asset space.

All of these factors have made Bitgo shares a high-demand asset. However, the company is privately owned, meaning that you can’t purchase shares from a traditional broker. To gain access to Bitgo Pre-IPO shares, you will need to learn how to navigate the secondary markets and qualify. Here’s what you need to know.

What is Bitgo?

Bitgo is a leading cryptocurrency exchange and products provider. The platform entered the market in 2013 and is headquartered in Palo Alto. The company’s founders include Mike Belshe, Ben Davenport, and Will O’Brien. Notably, the group entered the market seeking to improve crypto security and drive adoption.

First Multi-Sig Wallet

As part of this strategy, Bitgo released a secure non-custodial wallet as its first product. The wallet included new features like multi-signature technology, which revolutionized the market. Multi-sig wallets require more than one private key to conduct transactions.

This simple step helped to save billions in crypto theft as it made stealing someone’s private key only half of the equation. The introduction of multisig wallets helped to elevate trust within the crypto community and set a new standard that remains in place today.

Crypto Insurance

Bitgo was also a pioneering force in wallet insurance. It was among the first providers to secure insurance against hackers stealing funds from digital wallets. Like their game-changing multi-sig options, insurance is now the industry standard for exchanges.

Bitgo has seen strong support from financiers since its launch. In 2014, BitGo successfully secured $12 million in venture capital to expand its operations. The next year, the company acquired insurance for its wallets and released an API for developers.

By 2018, the crypto market had evolved considerably alongside Bitgo. The company was now licensed to offer custodial services and more. It also had procured several state licenses, including a South Dakota Division of Banking license in 2018 and a New York Trust Charter in 2021.

BitGo Prime

Bitgo Prime represented a shift in the company’s approach towards the market. Prime was built specifically for large institutional clients. As such, it included a host of custody and risk management solutions. For example, institutional users could set up policy-based transactions approval, monitor detailed audit logs, and conduct real-time management of their operations.

Whitelisting

Bitgo now offers full whitelisting services to developers and businesses seeking to offer advanced services to their clientele. This approach has helped the firm to gain more market penetration. Specifically, there has been a push by institutional investors to add digital asset services to their offerings. Bitgo provides companies with the ability to easily offer these services using their whitelisting features.

Wrapped Bitcoin (WBTC)

Notably, Bitgo has been pivotal in driving the adoption of new types of digital assets, including Wrapped Bitcoin. This unique asset allows Bitcoiners to lock their crypto into a smart contract and receive an ERC-20 compliant token in return. This token can be used to access advanced DeFi features inside the Ethereum ecosystem. Wrapped Bitcoin frees up liquidity and enables traders to participate in new opportunities without losing ownership of their original asset.

Acquisition Attempt

Interestingly, Bitgo was to be acquired by Galaxy on May 05, 2021. The $1.2B deal would have seen Citi, Maples Group, Davis Polk, and more gain control over the firm. However, the acquisition fell through in 2022 due to disagreements between the parties. Consequently, Bitgo remains privately held.

Historical Funding Rounds

Summary of Bitgo Funding:

Total Funding: Bitgo secured $170M across 7 funding rounds

Largest Round: Bitgo’s largest funding round secured $100M in August 2023.

Investors: A total of 38 institutional investors and 4 Angel investors backed Bitgo

Latest Round: The latest funding round raised an undisclosed amount and was a Series C round held on January 24, 2024.

Funding Rounds Breakdown:

• 4 Early-Stage
• 2 Late-Stage
• 1 ICO rounds

Key Investors:

Bitgo secured funding from Brink, Goldman Sachs, Galaxy, Valor Equity Partners, DRW, Redpoint Ventures, Founders Fund, BitFury, Digital Currency Group, Liberty City Ventures, Blockchain Capital, A-Grade Investments, Bridgescale Partners, Radar Partners, and more.

Why Invest in Bitgo?

There’s a long list of reasons why investors continue to seek out Bitgo shares. For one, the company is one of the oldest and most established providers in the crypto market. It has seen the digital asset space go from a handful of coins to thousands of tokens, services, platforms, and products.

Pillar in the Blockchain Industry

Throughout that entire time, Bitgo has remained true to its goal to provide digital asset security, custody, liquidity, and crypto infrastructure to the market. Additionally, it has expanded its operations to include fully regulated and insured custody solutions for +1,300 tokens across multiple blockchains.

Competitive Positioning

Bitgo remains a top-performing blockchain service provider. The company currently ranks 6th among 2596 active competitors. This ranking is consistent with its long-time support for digital assets. Notably, there have been times when Bitgo has been responsible for +20% of Bitcoin trading value.

Funding and Investor data sourced from Tracxn.

1. Pre-IPO Secondary Marketplace

Secondary markets are purpose-built exchanges that connect pre-IPO shareholders with potential investors. These marketplaces can offer these assets because they work closely with employees, early-stage investors, and venture capitalists, who are crucial to the company’s pre-IPO growth.

Investing in pre-IPO shares of Bitgo could offer strong returns if the company’s valuation increases following its IPO. It’s common for company valuations to increase following an IPO. As such, it makes sense to add pre-IPO shares to your portfolio before the firm announces plans to go public.

Secondary marketplaces have many requirements. Here are some concerns you should be made aware of:

Eligibility: This approach requires you to be an accredited investor, meaning you will have to show at least $1M in liquid assets to qualify for access.

2. Private Equity Firms

Private equity firms gain access to pre-IPO shares during investment rounds. They then offer these shares to high-net-worth accredited investors with a commission. Notably, private equity firms are known to have extra stipulations, including blocking the sale of shares for years in some cases.

3. Employee Equity Sales

Many consider employee equity sales as the best way to acquire pre-IPO shares in Bitgo. This method of acquiring pre-IPO shares requires you to connect with former employees. It’s common for companies to issue shares as part of an incentive package. Notably, this profit-sharing method has become more popular, leading to more pre-IPO share opportunities for investors.

Private Transactions: There are a lot of hoops you will need to jump through to complete a private pre-IPO transaction, including creating specific legal agreements, conducting valuations, and setting in place any limitations on the transfer of the asset.

Brokerage: Brokers will take a lot of the confusion out of the pre-IPO process. These professionals can guide you through each step, ensuring full compliance and avoiding common errors untrained professionals make.

There are several risks that you should consider before jumping into the pre-IPO shares investment arena. Here are the top concerns:

Liquidity Risk

If you are looking for an asset that you can sell right away, pre-IPO shares are not the best option.

These investments can include sales and transfer clauses that prevent the transfer of the asset until certain criteria, such as the IPO’s completion, are met. It’s even common for pre-IPO shares to require you to wait years before gaining the ability to sell your assets.

Finding a Broker

If you meet the requirements and are comfortable with the risks, several platforms offer access to pre-IPO opportunities:

Forge Global: One of the largest private stock marketplaces, offering shares in late-stage startups like SpaceX, Stripe, and Databricks. Minimums typically start around $100,000.

EquityZen: A popular platform allowing accredited investors to buy into private companies with minimums as low as $5,000. Past offerings include companies like Discord and UiPath.

Rainmaker Securities: A full-service broker that helps source and negotiate private share sales, including opportunities in companies like OpenAI, Stripe, and Palantir.

Hiive: A newer platform with live bid/ask pricing for hundreds of private companies. Transparent and low-fee, with minimums starting around $25,000.

MicroVentures: Offers pooled access to late-stage companies through special purpose vehicles (SPVs), including past investments in SpaceX and Instacart.

EquityBee: Allows investors to fund employee stock option exercises at startups, often at discounted valuations, with minimums around $10,000.

Augment: A digital-first marketplace showing real-time pricing for pre-IPO shares, targeting tech-savvy investors and offering lower transaction fees.

StartEngine Private: Launched in late 2023, this platform offers accredited investors access to Regulation D offerings in later-stage, venture-backed companies. In its first nine months, it generated $16.5 million in revenue, with average investments around $32,000

Important: Always perform thorough due diligence and consult a financial advisor before investing in private company shares.

Valuation of BitGo and Future IPO

Bitgo has a valuation of $1.75B as of Aug 16, 2023. It secured this value through a combination of factors. For one, it was among the first exchanges to offer institutional support and industrial-grade security options. This strategy enabled the company to gain a large client base across +90 countries.

Impressively, Bitgo has around 166 employees. This low employee count could mean the company has plenty of room for expansion. Today, Bitgo’s contributions to the crypto market can’t be overlooked. Key technologies like multi-sig wallets helped to take cryptocurrencies from back-end computer users to massive institutions.

Those holding Bitgo shares hope to capitalize on the company’s growth and strong positioning. If Bitgo announced plans to host an IPO in the coming year, it could be one of the largest blockchain-focused IPOs ever. Keenly, the company already has support from institutional clientele, and there are now more platforms than ever that rely on its services.

Investing in Pre-IPO Bitgo | Conclusion

Investing in Bitgo could position you for future returns. Use of digital assets is on the rise, and cryptocurrencies are going mainstream. Even governments have begun to open Bitcoin reserves. All of these factors could result in Bitgo growing even larger and more important to the market’s development.

All investors should do in-depth research on any firm they are considering investing in. Pre-IPO shares have a lot of extra caveats compared to regular stocks. In many instances, they can’t be sold or traded until after a deadline.  As such, it’s recommended that you consult a financial professional to ensure you remain within your risk appetite. Those who do the research and decide that Bitgo meets their criteria could find that the platform provides a lot of upside potential.

Learn about Other Pre-IPO Opportunities Now

Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice. Pre-IPO shares are typically available only to accredited investors and carry significant risk. Always perform thorough due diligence and consult a financial advisor or legal expert before making investment decisions.