Investing in Consensys | How to Buy Pre-IPO Shares

Blockchain supporters got good news this week regarding the Consensys IPO, which is already shaping up to be one of the most anticipated listings in the sector. Notably, the decision to take the company public falls in line with the greater trend of blockchain companies merging with traditional finance.

Consensys is a leading provider of blockchain software and services. It has 100M registered users and is connected to 244k apps. As such, the company continues to draw investor attention. Until recently, the only way to acquire Consensys shares was to navigate the secondary market.

However, as more IPO details are shared with the public, it reveals that you will soon be able to find these assets via traditional brokers. Here’s what we know so far about the Consensys IPO and what it could mean for the entire crypto industry moving forward.

IPO Details

Investors may be eager for details, but there isn’t a lot to go on. When asked for a statement, company executives replied that there was “nothing to announce at this time.” Here’s what’s public information so far.

Consenys is a leading blockchain service provider, and its IPO would be one of the largest Ethereum infrastructure-based offerings to date. Sadly, the company remains tight-lipped on the IPO date, but some reports suggest it could occur as early as next year, leaving the company plenty of time to evaluate the market and strategize its event.

Banks Selected

Consensys did share some additional news in regard to the banks that will underwrite its IPO. The company selected JPMorgan and Goldman Sachs as its financial partners. Both firms are Wall Street powerhouses that bring expertise, experience, and an international network of financiers to the table.

Keenly, these institutions are trusted and respected across the globe. As such, their involvement adds a lot of credibility to the IPO. Additionally, it demonstrates just how far the blockchain sector has evolved.

Long gone are the days of blockchain companies developing unique ways to access public funding. Today, the world’s most influential financial institutions are lined up and ready to help merge the digital and traditional economies.

Why the Banks Chosen Matter

Aside from adding a lot of legitimacy and boosting investor confidence, these banks serve other vital roles. As the underwriters, they are intricately involved in the process, including gauging investor interest, determining the share prices, structuring the event, and, in some cases, they will even purchase any unsold shares.

It was a Long Journey

Consensys had to overcome many hurdles to secure its IPO. For one, it had a pending case with the U.S. Securities and Exchange Commission (SEC) in which the group alleged that MetaMask, the company’s flagship wallet, violated securities laws when it offered staking to users. The regulators cited $250M in profit claimed by the company as proof. Wisely, the SEC dropped the lawsuit, opening the door for the company to go public.

What is Consensys?

Consensys was founded in 2014 by the Ethereum co-founder, Joseph Lubin. He recognized the need for a safe and easily accessible wallet option that could seamlessly integrate into future dapps. As a critical member of the Ethereum community, he saw how quickly dapps were being created and adopted by the masses. He knew that these platforms needed to have a secure wallet that could work across the ecosystem.

Source – Consensys.io

MetaMask

The MetaMask browser extension launched in 2016 alongside the Infura Ethereum API. MetaMask found immediate success due to several factors. For one, it was a web extension, pioneering Web3 from the time. The wallet could do more than just send and receive crypto as well. For example, it could also act as your digital ID, enabling you to quickly switch between Ethereum dapps without any login delays.

MetaMask is a non-custodial wallet, meaning that you hold your crypto directly. As such, it’s much safer than custodial options, which leave you open to delays and hacks targeting the platform. At the time of its launch, it was the easiest and most accessible option for Ethereum users. Today, it retains this streamlined strategy, which has helped it secure +100m users.

Linea

Linea is a second-layer protocol designed to reduce congestion on the Ethereum blockchain. This off-chain solution is funded and managed by Ethereum, which has helped it grow into one of the largest ecosystem funds in the community. Linea provides enterprise-grade security, increased transaction speeds, and convenience to Ethereum users.

Leading the Charge

In 2017, Consensys helped start the Enterprise Ethereum Alliance. As a founding member, it has been instrumental in driving mainstream adoption and integration of blockchain products. Additionally, the company has made several acquisitions that have strengthened its positioning, including Planetary Resources in 2018 and the Quorum blockchain in 2020.

What Consensys Going Public Means for the Industry

This latest news demonstrates a maturing of the blockchain sector driven by a combination of factors. For one, recent regulatory transparency has helped companies merge into the traditional markets. This improved clarity by lawmakers has helped several firms make the leap. Most notably, Circle and Bullish recently hosted IPOs.

Historical Funding Rounds

Summary of Consensys Funding:

Total Funding: Consensys secured $725M across 6 funding rounds

Largest Round: Consensys’ largest funding round secured $450M on March 11, 2022.

Investors: A total of 57 institutional investors back Consensys

Latest Round: The latest funding round raised an undisclosed amount and was a Series D round held on November 09, 2022.

Funding Rounds Breakdown:

2 Early-Stage

3 Late-Stage

1 Grant

Key Investors:

Consensys secured investments from Samsung Venture Investment, Microsoft, Temasek, Anthos Capital, Sound Ventures, SoftBank Vision Fund, C Capital, Third Point, True Capital Management, Marshall Wace, and UTA.VC, ParaFi, DeFiance Capital, Spartan Group, Animoca Brands, Electric Capital, Coinbase, HSBC, and more.

Why Invest in Consensys?

There are many reasons to invest in Consensys shares. For one, the company has been a pioneering force in the blockchain economy since its earliest days. Additionally, its founder has repeatedly created platforms that have reshaped the market.

Institutional support

Consensys has strong institutional support and has partnered with two of the most respected banks in the market. This support showcases the growing institutionalization of the blockchain industry. Additionally, it represents how traditional financial institutions are now eager to integrate blockchain products and services.

For those who don’t want to wait for the IPO, there’s always the secondary market. This avenue is far more complex and will require you to be an accredited investor to qualify. However, it will provide you with direct access to shares before they’re highly anticipated IPO. Here’s what you need to know.

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 Consensys 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 Consensys. 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 Consensys and Future IPO

Consensys achieved Unicorn status after it secured a valuation of  $7B on March 15, 2022. The company managed to secure this value due to several factors. For one, it’s the industry leader and has been instrumental in driving adoption. Today, it is a crucial component of the Ethereum ecosystem, which is larger than it has ever been.

Consensys is privately owned, but it does have plans to host an IPO in the near future. As such, investors holding these assets could find that they are well-positioned. If Consensys can continue to dominate the market and drive innovation and adoption, it’s likely its shares could see added value.

Consensys Conclusion

The Consensys IPO will accomplish several key tasks for the blockchain market. For one, it opens the door for broader institutional adoption. Also, it will help to inspire other firms to take their projects public. As such, the IPO will help to further legitimize the decentralized economy and open the door for more people to participate in it.

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.