Hiive wants to bring transparency to the private equity secondary market

Private market trading has taken off over the last decade, but it often gets a bad rap. Misconceptions aside, the market has a reputation for being opaque and uncertain, and Vancouver-based Hiive is looking to change that.

Hiive offers a marketplace for buyers and sellers of shares in private and pre-IPO venture-backed companies. The trading platform allows qualified investors to place an order to buy or sell shares of late-stage companies directly from another party, without the need for a live broker.

The bootstrapped business is looking to bring transparency and efficiency to the private secondary market and, since officially launching its platform last summer, has already picked up steam, according to its CEO and co-founder, Sim Desai.

“We’ve got very significant commercial traction in the last few months, to the point that we now view ourselves as, in terms of volume, one of the more significant players in the global marketplace already,” Desai said.

In a recent interview with Vancouver Tech Journal, the CEO discussed Hiive's progress to date, how the team hopes to disrupt the private equity secondary market, and the company's vision for 2023.

An asset class on the rise

Desai claims Hiive is the first direct trading platform for private stock. “There's really no other solution yet that exists that actually enables buyers and sellers to trade directly with each other through the platform,” he said.

Through the Hiive dashboard, accredited investors post orders to buy or sell private stock. Those live bids and listings become visible to other users in the marketplace, who can negotiate directly and make deals in a centralized place. There is no charge for users to enter the platform, Desai said. Hiive instead makes its money through commission, which is paid once a transaction is completed.

Currently, Hiive is available to users in the United States, as well as a few other foreign jurisdictions not including Canada. The company is now looking to secure regulatory approval to make the platform available to Canadians.

Hiive’s solution is also only available to accredited investors, a special status designated by financial regulation laws. The company is registered with the US Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corporation.

Hiive was co-founded in Toronto by husband-and-wife duo Desai and COO and general counsel Sarah Huggins, alongside executive vice president Prab Rattan, and CTO and head of product Stuart Eccles. Desai and Huggins are both lawyers by training, and in 2008, Desai got his start in private equity secondaries at Setter Capital, an investment bank that primarily focuses on the private equity secondary market.

“The market really started taking off in the late [20-]teens,” Desai said. “I was managing a venture capital secondaries trading team at my prior firm at that time, and we saw that there was a big opportunity to pursue a more centralized marketplace for these securities.”

In 2021, the founding team began building Hiive and relocated from Toronto to Vancouver. The platform opened in beta in May 2022, and completed its official launch later that summer. “So far, the results have been pretty spectacular,” Desai said.

In the last year, Hiive has managed to grow its team from roughly four employees to approximately 25. While Desai declined to disclose specific figures, he said the company has experienced exponential monthly user growth since its May beta launch.

Shining a light on an opaque market

Unlike primary markets, where securities are created, the secondary market involves the buying and selling of pre-existing investor commitments to, in this case, private equity stock. Not only are these assets speculative, risk-prone, and inherently illiquid (which Hiive makes clear on its website), but there is also a good deal of complexity involved in sourcing deals, performing due diligence, and executing secondaries.

Since 2010, this market has seen increased levels of activity as investors have sought to increase and diversify their private equity exposure. In 2022, private equity secondary buyers collectively managed $300 billion with $127 billion of dry powder. Yet, for all its recent growth, Desai believes this market can still be rather cloudy, due in part to the lack of efficient price discovery.

“In other words […] there's not one central clearing place where you can find out the efficient price or the market price for a stock,” he said.

In addition to displaying what Desai called “static information” about a security, such as company investors, valuation at last raise, and capital raised to date, Hiive also provides “dynamic information,” such as the price at which volumes are trading or the bid-ask spread. These figures, which often change from day to day, are generated with trading data from the platform’s users.

“This really goes to what is so special and innovative about Hiive, that information is actually generated on our platform by the trading activities of our customers,” Desai said.

By automating the process of placing an order until there’s a match between a buyer and seller, Hiive is also looking to sidestep the middleman, meaning human brokers, whom Desai said parties must often rely on for critical information.

“That leads to a lot of uncertainty and opacity and frustration for parties in the market; having to deal through a human being who may have different motivations and a different agenda than necessarily your best interests,” he added.

Time to scale

Now entering its second year, Hiive is gearing up to reach several milestones in 2023. For one, the company has been self-funded since its founding, but that might soon change. Desai said the firm has been approached by investors and is in the early stages of a possible Series A financing round.

Hiive is also developing an interface that will allow individuals who are not accredited to access the platform as sellers. The CEO hopes to complete registration with Canadian regulators soon, which would also open up the platform to those in the company’s home country.

While there are several items on Hiive’s agenda, Desai’s top priority is to continue to grow the team. The company is currently hiring senior and mid-level positions, and Desai hopes to double Hiive’s headcount to 50 in the next 12 months.

Desai believes Hiive is already toe-to-toe with some of the top players in the business. As the company looks to bring more transparency and efficiency to the secondary market for private equity, he feels it has the potential to be an industry leader.

“Our biggest focus is that we feel that we've found a real market opportunity, and we just want to grow as quickly as we can to pursue that,” he said.

This article previously read that Sarah Huggins was Hiive’s CTO. It has been corrected to reflect that she is the company’s COO and general counsel.