Investing in Discord | How to Buy Pre-IPO Shares

Discord operates as a top-tier online communication ecosystem. The platform offers effective, low-latency options, including voice, video, and text, to over 100 million active daily users. From its humble beginnings as a development studio to becoming the most popular way for gamers and businesses to communicate, Discord remains an inspiring story of entrepreneurialism.

Since its launch, Discord has managed to stay relevant, even as more capable competitors emerged. All of these factors, combined with its positioning, have made Discord shares a high-demand asset. However, the company is privately held and hasn’t listed any IPO date. As such, you will need to acquire shares from employees or the secondary market. Here's what you will need to know to gain access to pre-IPO shares of Discord.

What is Discord?

San Francisco-based Discord has an interesting history that begins in 2012 when Jason Citron and Stanislav Vishnevskiy, the company's founders, launched the gaming title Fates Forever. This was the first release from their newly created gaming studio, and the two had high hopes for its success. Sadly, the game never caught on, and the title faded away into obscurity.

Notably, one feature did outlast the game – the unique chat option. The game's communication feature utilizes a new approach to ensure latency-free text and images. The two quickly realized that this feature could enhance many games, leading to a shift from game development to creating a dedicated chat for gamers.

Discord Offers Universal Gaming Chat

The concept was unique in many ways. For one, the chat would not be reliant on any single system or game. Instead, it could work with any titles and across a growing number of console and PC options. Discord officially launched in 2015.

Source – Discord

It didn’t take long for the superior chat features to gain traction in the market. Gamers from titles like League of Legends and Final Fantasy XIV had long complained about lag or a lack of communication in the games. Now they had a dedicated chat option that was available in desktop, mobile, and web versions.

Live Streaming

Discord took the concept further by supporting video and live streaming options. This innovative approach caught the attention of investors like WarnerMedia and Greenoaks Capital, who were the first to recognize the platform's potential.

Today, Discord serves +350M registered users. It's become a critical component in the multi-billion-dollar gaming industry and has been integrated directly into console options like Xbox Live. Also, gamers enjoy more features than ever, including video calls up to 25 people, live streaming, support for custom servers, monetization options, and much more.

Historical Funding Rounds

Summary of Discord Funding:

Total Funding: Discord secured $922M across 11 funding rounds

Largest Round: Discord's largest funding round secured $500M in September 2021.

Investors: A total of 53 institutional investors and 2 Angel investors backed Discord

Latest Round: The latest funding round raised an undisclosed amount and was a Series I round held on March 03, 2022.

Funding Rounds Breakdown:

• 3 Early-Stage
• 8 Late-Stage

Key Investors:

Discord secured funding from several investors, including Flat Capital, Dragoneer Investment Group, Baillie Gifford, Coatue, Fidelity Investments, Franklin Templeton India, Sony, Greenoaks, Index Ventures, Danny Rimer, Tencent, Benchmark, Greylock, Spark Capital, IVP, YouWeb, Mitch Lasky, IDG Global Solutions, Accel, and more.

Why Invest in Discord?

There's a long list of reasons why an investor would seek out Discord shares. For one, it has successfully offered its services to the gaming community without incident for a decade. The company has seen the industry shift from consoles to PCs to mobile gaming and more.

Currently, Discord ranks 1st among 370 active competitors. It serves a vital role in the gaming and communications sector, where it provides flexibility and easy integration. This positioning has provided Discord with a unique insight into the market conditions. This perspective helped Discord keep an innovative spirit, resulting in a steady flow of new features for users.

Custom Servers

Few chat protocols support customization like Discord. The developer-centric features of the platform, like the API, simplify adding advanced chat options to games. Additionally, the flexibility afforded to servers makes it easier to support monetization strategies.

Low-Latency Communication

One of the main reasons why Discord has seen success since its early days is its commitment to low-latency communications. There are a few things more aggravating than choppy gameplay. While game developers understood this, they spent their time focusing on gameplay. Discord was the first to make gamer communication the priority, resulting in an effective and free solution that millions rely on.

Multi-Platform Support

The independent approach that Discord took to gaming is another reason why the company is so established. The developers understood that the gaming sector is a fast-paced market that sees titles, consoles, and customer expectations shift frequently. Discord can support these and future changes. Consequently, it remains the most popular way for gamers to communicate across devices.

User-Friendly

Discord offers the community a user-friendly interface that provides direct access to the key features. The interface's simplicity helps to make it more approachable for new users. Also, it doesn't detract or distract from gameplay.

Community Building

Discord has placed a lot of attention on community building. They recognized that for many people, their gaming community is their primary group of friends. As such, the platform has integrated community-building features and services designed to help cultivate an engaging community. These options allow hosts to communicate with users in a variety of ways. They can host gaming competitions, do giveaways, host listening parties, and more.

Discord Nitro

Another good reason to consider investing in Discord is its subscription products. Discord Nitro offers users access to larger and more efficient chat features. You can send friends emojis and even boost the speed of your server. Keenly, Discord Nitro gives the community the option to easily upgrade their communications.

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 Discord 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 Discord. 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 Discord and Future IPO

Discord secured a valuation of $15B on August 25, 2021. The company earned this valuation due to its commitment to security, performance, and efficiency. It remains the leading chat protocol for gamers globally. This positioning has only gotten stronger over the last 5 years as events like the COVID-19 pandemic placed additional emphasis on online communication services.

There are many analysts who predict Discord will decide to go public shortly. If the company were to host an IPO, it could be one of the largest IPOs to date. The platform has strong institutional support and has proven to be a reliable asset across multiple sectors. All of these factors could add value to the event.

A Discord IPO will be met with support from the private sector for multiple reasons. Its positioning and innovative history make it a titan in the market. As such, those who hold Discord pre-IPO shares seek to capitalize on this momentum and reputation.

Investing in Discord Pre-IPO Shares | Conclusion

Investing in pre-IPO shares of Discord opens the door for potential upswings in value for those willing to accept the added risks. As consoles start to stop production in favor of cloud-based options, services like Discord will become even more valuable to the gaming community. Despite growing demand, investors still need to consider key risks associated with investing in tech stocks.

It's recommended that you always do thorough research into any pre-IPO stock before making your investment. Many factors make Pre-IPO shares unique, including no-sale periods and more. For those who complete their research, qualify for access, and want exposure to the communications sector, Discord provides an exciting opportunity worth checking out.

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.