B2B or B2C? How about both: Building the infrastructure for retail access to private markets

Takeaways from private markets innovators at the LSE Alternative Investments Conference this week

If you only have a few minutes to spare, here’s what you should know about the importance of serving the end investor in private markets:

• 🛠 Infrastructure businesses will power private markets: Picks and shovels businesses like iCapital, Republic, and Bunch (amongst many others) will be the catalyst that enables the mainstreaming of alts. Many of the financial services industry’s most valuable capital markets businesses provide the pipes and plumbing behind the scenes.

• 🛒 Infrastructure, but with the end consumer, the individual investor, in mind: Infrastructure is key, but the most valuable alts businesses will combine critical B2B pipes and plumbing with a maniacal focus on providing the best tech and product experience for the end consumer — the individual investor. Building a business with a single customer archetype is hard enough. Building a business that must serve both B2B and B2C customers simultaneously in a much taller task. But the platforms that crack this code will build incredibly valuable businesses in the alts space.

• 🎙 Hear perspectives from private markets innovators: This week’s panel at the LSE Alternative Investments Conference provided a window into the challenges, complexities, and opportunities of building the critical market infrastructure for private markets. Read below for insightful perspectives from executives at iCapital, Republic, and Bunch.

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Earlier this week, a group of alts leaders spoke at the LSE Alternative Investments Conference, where I moderated a panel with executives from iCapital (Marco Bizzozero, Head of International & Member of Executive Committee), Republic (Ken Nguyen, Co-Founder & CEO), and Bunch (Levent Altunel, co-Founder).

The conversation was lively and the insights were fascinating. The panelists all said they believe that retail is the future of private markets. This may be unsurprising given that each of these companies are building the infrastructure to support increased retail participation in private markets. But it is nonetheless important to note how certain types of businesses will define the future of private markets.

An interesting feature of these three businesses — and many others who are building foundational platforms in the alts space — is that they are infrastructure businesses with a consumer focus also embedded in their DNA. Even if some of these companies’ customers are primarily businesses (i.e. wealth advisors, private banks, VC funds, PE funds), the end consumer of the investment products — individual investors — is a core consideration as they build their respective businesses.

Building a business with a single customer archetype is hard enough. Building a business that must serve both B2B and B2C customers simultaneously in a much taller task. But the platforms that crack this code will build incredibly valuable businesses in the alts space.

So, let’s dive into each of the three businesses — iCapital, Republic, & Bunch¹ — that discussed this topic on the panel at the LSE Alternative Investments Conference:

iCapital provides the infrastructure that enables fund managers, private banks, and wealth managers to efficiently and effectively access alternative investments at lower minimums. Their primary customers are fund managers on the GP side and wealth managers and private banks on the LP side. But ultimately the end client on the LP side is a consumer — a HNW individual whose capital is being allocated to private funds. iCapital has managed to build a platform with $149.3B of assets and 1,180 funds (as of November 30, 2022).

Republic exists to enable individual investors to access private markets. They’ve created the infrastructure — both regulatory and technology — to allow individuals to invest into different alternative investments. Like iCapital, Republic has customers on the supply side (issuers) and demand side (investors). The issuer side is a B2B business — and an important one. They are helping turn those issuers’ customers into equity owners. On the investor side, they are building for an end consumer that demands an investing experience akin to an e-commerce shopping experience. Republic has managed to build a platform that serves over 2.5 million consumers globally and has invested billions into over 600 deals.

Bunch enables companies, funds, and individuals to create SPVs to efficiently invest into private companies and funds. They’ve built the infrastructure to enable investors in Europe to invest into private markets in a more streamlined way. They serve funds and companies, but ultimately the individual investor needs to have a superb consumer experience to benefit from the product. They’ve clearly found product-market fit in an ecosystem where many manual processes (like notary, wet ink signature, paper-based documents) are required for individuals and funds to complete investments. They’ve scaled to over 150M EUR of assets under administration and over 500 investors served since their May 2022 launch.

There’s a lot we can learn from the success of each of these three companies. They each serve different markets and have different customers on the supply and demand sides of their respective marketplaces.

But they also have a key similarity — they have built their platforms and user experiences with the end customer, the individual investor, in mind. And if the alts space is going to grow in line with predictions of firms like Goldman, who projects AUM growth in the alts space of up to $30T of AUM in the next 4 years from almost $11T today or Pitchbook, who projects between $13T to $16.1T AUM by 2027, a meaningful portion of that growth is going to come from individual investors. This is of particular import in the PE and VC fund worlds, where institutional investors are feeling the impact of the “denominator effect.”

So, as an industry, in order to continue enabling the mainstreaming of alts for the individual investor, it will be key for companies building in this space to think about how to best serve the end investor so that they have the information, data, access, and tools to evaluate, invest, and manage their alternative investments.

There are a number of other companies who have built solutions for the end investor.

What are some other examples of B2B x B2C businesses (included in this non-exhaustive list below) in the alts space that have built elegant experiences for the end investor?

Carta: serves fund managers, companies, employees, and individual investors / private market asset owners.

Forge: serves private companies, funds, and individual investors / private market asset owners.

Caplight: serves funds and individual investors / private market asset owners.

AngelList: serves private companies, fund managers, employees, and individual investors / private market asset owners.

Allocate: serves fund managers, wealth managers, and individual investors.

Moonfare: serves fund managers, wealth managers, and individual investors.

Passthrough: serves fund managers and investors (from institutional investors to individuals).

SeedLegals: serves companies, fund managers, and individual investors.

What other companies in private markets straddle both B2B and B2C customer bases? Share your thoughts in the comments below.

1. Broadhaven Ventures is an investor in Republic and Bunch and the author, Michael Sidgmore, was an early employee and Seed investor in iCapital.