When Swedish startup Tioex managed to buy secondaries in Klarna for its members in 2020, it was a move considered almost impossible.
Now, the company has entered the US market by investing $1m in Elon Musk’s SpaceX.
“To be honest, we were so lucky,” CEO and founder Johan Hägglund tells Sifted.
“After months of going back and forth, we managed to invest $1m in a block of shares. All the stars were aligned.”
The secondary market
In Sweden, the secondary market for buying shares in tech startups is a relatively new field for fintech companies and Tioex is the first of its kind to get a stake in a high-profile startup, like Klarna, three years ago.
Since then, it has also acquired shares in several other startups, such as last-mile-delivery scaleup Instabee, EV startup Einride, EV motorcycle startup Cake, digital healthcare provider Doktor.se and solar panels for gadgets scaleup Exeger.
Until now, Tioex has focused on Swedish startups, but its members were keen on SpaceX, so it decided to have a try.
SpaceX, the second most valuable startup in the world after ByteDance (the Chinese startup behind TikTok), announced in December last year that it would sell shares of a value of $500m to $750m in the company at a company valuation of $180bn.
Tioex, which had spent a year analysing the pre-IPO market in the US, quickly realised that it was much more difficult to buy secondaries there than in Sweden.
“This is a completely different market where investment sums of $20-50m are expected. It's a bit like when you play football in a local league, then all of a sudden you have to play a World Cup final — at times it was surreal,” he says.
In other parts of the world, the US-based Forge Global — which merged with its main competitor SharesPost in 2020 — and EquityZen offer existing shareholders, including employees with stock options, marketplaces to sell their shares to interested buyers.
There are similar marketplaces for secondaries in Europe, with UK-based Crowdcube and Seedrs, leading the space.
But Tioex is a bit different. It’s not a marketplace as such and rather tries to get deals on specific startups it wants equity in by targeting existing shareholders who are in a position to sell.
Tioex, founded in 2019, is member-driven and invests based on what its members want. Today there are about 6,000 members and most of them are active in the tech sector, according to Hägglund.
“There is a mix of people but there are founders of other tech companies, C-suite executives, as well as people in private equity and VC,” he says.
The members that want in on a deal have to invest a minimum of 50k–100k SEK (€4.4k–€8.8k), and will be allocated shares depending on how much interest there is among other members and how many shares Tioex can secure.
To date, Tioex has invested around 200m SEK (around €18m) of its members' capital in secondaries. Its largest stake is in payment company Klarna, which it has invested in on four different occasions — at very different valuations.
“You could say that we have invested throughout the different cycles — from reasonable, to top, to when it was going down to when it is on the way up again — and now there is an increased interest in Klarna again,” he says.
The dip in valuations and the overall economy over the past 18 months have been good for Tioex.
“The advantage for us last year was that there were more secondaries available and fewer other bidders, so we managed to do a lot of investments that we wouldn’t have been able to do the year before,” Hägglund says.
The investment startup does not charge a membership fee or management fee; however, investors will pay a price for a good investment. According to Hägglund, Tioex will take around 20% cut of the profits when it comes to selling the shares.
And Tioex members are in it for the long run, whether they want to or not. Hägglund says that making it possible for members to sell their shares before an IPO is difficult because Tioex doesn’t have the regulatory requirements to trade shares.
SpaceX opens up for more US and European investments
Having managed to get on the cap table at SpaceX, Tioex believes that it will be able to make many more investments in pre-IPO startups in the US.
“The US is the largest pre-IPO market in the world. Having managed this, it will be easier making other investments there,” Hägglund says.
Asked if he is interested in buying secondaries in European startups, he says now that they have invested in the US, the process for investing in Europe will be pretty similar.
“There are absolutely exciting pre-IPO cases in Europe, but they are often in the same category as other ones in the US. If you invest in, for example, Stripe or Revolut, I don't know if I think there's any big difference. One is in the US, the other one in Europe.”
Correction: In a previous version of this article it was stated that Seedrs and Crowdcube had merged, however, that deal didn't go through in the end.