The past year hasn’t necessarily been kind to startup founders and leadership. Venture capital deal volume has slowed. Valuations are declining. Most recently, the collapse of Silicon Valley Bank and other institutions left a gaping hole in the private company financing ecosystem.
As we navigate an uncertain economy, it’s important to consider the lessons we can learn from these leaner times.
Running a high-growth, private company is difficult even in the best of circumstances. In 2022 and 2023, many startup leaders have faced lower valuations, stricter term sheets and tightening budgets. Dreams of a high-value exit or splashy IPO can seem far away; many founders can only focus on extending their runway and keeping their staff employed.
We don’t know exactly what the startup and VC market will look like in the second half of 2023 and beyond — but it will be different from what we’re used to. How can we create a more sustainable ecosystem when the pendulum inevitably swings back towards a more bullish startup market?
Laying the foundation for a more sustainable startup dynamic begins with providing more private companies access to the infrastructure and tools that help them grow the right way. Part of that strategy involves taking some of the hallmarks of the public markets — trust, transparency, standardization — and making them available to private companies and their stakeholders.
Most people know Fidelity as one of the largest providers of public market infrastructure: all of the systems and processes that help us know the value of public companies and the stake we hold in them.
While this is true, Fidelity also has a long history of working with private companies at every stage, including early-stage VC financing, later-stage mutual fund, and even helping take big-name companies public. Fidelity’s acquisition of Shoobx is another step towards furthering its commitment to providing that same level of trust, transparency and standardization to the private market.
So how does this acquisition benefit the private company founder or leader? Let’s explore how:
Why Private Markets Need Better Infrastructure
Consider the experience of trading public-market stocks. With each transaction, stakeholders can easily see how much stock they own and what that stock is worth. Everyone has confidence that the numbers we see are backed by standardized processes that ensure accuracy.
Now compare that to the private markets. Standardization is rare. Founders, investors and employees don’t have the same trust in the system. Cap tables determine who owns what. But so often, cap table calculations are done in offline spreadsheets, then manually entered into online software. The whole process is begging for data entry errors that can have real consequences.
For a variety of reasons, entrepreneurs sometimes wait until the eve of a fundraising round to clean up their cap table, IP agreements, offer letters and equity grants. Founders are inherently busy, and some underwhelming cap table software options don’t help proactively link legal documentation with cap table data. This can lead to frantic diligence, tens of thousands of dollars in legal fees and a lack of transparency for investors.
As we approach the new era of startups and venture capital in the remainder of 2023 and beyond, this system needs tweaking. To inject more standardization and trust, we need industry players to meet startups where they are.
Fidelity: Bringing Infrastructure to the Earliest Stages
Although it’s a large entity with a big-name brand, Fidelity has been a pioneer in bringing its public market infrastructure and resources to emerging private markets. Here are a few examples:
A commitment to helping companies at all stages
Highlighted by its acquisition of Shoobx, Fidelity continues to proactively address the challenges and needs for all companies at all stages. Using its 20+ years of equity management experience, processes, and proven infrastructure, Fidelity is continuously aiming to support companies in every phase of their corporate lifecycle, from private to public and beyond – providing potential solutions, innovation, expertise, service, and a holistic user experience.
Fidelity Labs is Fidelity’s software incubator and digital studio. The program has helped launch brands such as SaifrTM, a SaaS business using AI to help create compliant, on-brand content more efficiently; CatchlightSM, an AI-powered software to help financial advisors grow their business; and ESG Pro®, an end-to-end ESG investing solution for financial advisors.
There’s also The Fidelity Center for Applied Technology®, or FCAT SM, a catalyst for breakthrough achievements in research and tech. Fidelity is using its resources to help founders solve real problems and drive real impact.
Integrated programs to help as your company grows
No matter how you grow, Fidelity can grow with you and provide an integrated program that supports you and your employees' wellbeing. Fidelity’s three core areas of integration include:
- Retirement: including 401ks, student debt programs, workplace giving, and more.
- Health: including health savings accounts, reimbursement accounts, and more
- and of course Equity solutions to support your company through IPO and beyond.
The Fidelity Equity Management Platform
Fidelity will continue supporting the startup world and bringing public-market resources and infrastructure to the earliest stages.
Fidelity is bringing a complete equity management solution to the private market; a solution that combines Fidelity’s expertise in equity compensation and benefits administration with cutting-edge equity management capabilities, board management tools and data room solutions for the secure storage and sharing of important business information.
The ongoing mission is to build a more sustainable private market landscape. Founders now have access to the tools and resources that help them build great companies and increase transparency and trust for their stakeholders.
Included are links to websites that may be unaffiliated with Fidelity.