Sim Desai, Hiive: Building a private stock marketplace and navigating hypergrowth

another great guest is with us today third uh major guest that I would have today on the CEO wisdom pod I'm glad to have SIM to say to say this eye on uh legendary guy uh his startup I'm very bullish on it's called Hive uh it's the marketplace for Private Stock basically really love the idea really love what he has going on lots of traction behind him

uh that can be felt uh the guy worked for this you know because he spent around a decade uh working well a bit more than a decade actually like 14 years working at a business that did similar stuff but not as satisfied not as productized as Hive is so I'm really glad to have SIM Desai on Sam can you say hi to the audience introduce yourself tell us a bit more about your startup hive yeah uh well hello everyone um Cheryl thank you for having me on appreciate it uh I'm flattered for you to call me legendary uh that's uh not sure anyone else has called me I bet that's my bet I think like right now you're undervalued I think you'll get up there like in the legendary status pretty soon that's my bet

all right well you and I are both open for that um but in the event yeah so that's absolutely right what we've uh what we're doing at Hive is we've created a Marketplace um for private Securities trading so what I mean by private Securities or private stocks is um stocks that don't trade on public markets uh so typically people know of them as pre-ipo stocks um some

uh another term people might be familiar with is unicorns um so that is generally where we focus is in um what we call late stage you're back to companies the Securities of those companies they don't trade on an exchange so if you want to buy or sell those stock uh you have to go to an intermediary and you know we traditionally were in this business I've been

in this business for a long time as you said um it's a business that's been populated primarily by uh you know traditional brokers who uh you know operate in a very manual way uh by phone and email um it's a very opaque process for sellers uh they you know oftentimes don't even know what fee they're gonna pay when they deal with the broker up front um they

don't know what the market price is for the stocks that they want to sell so they uh have to put a lot of trust into this sort of black box kind of situation that they're entering into when they deal with their traditional broker dealer whereas with Hive the idea is to have a centralized you know meeting place for buyers and sellers where they can actually go and

see a price chart for their stock so they want to sell uh stripe or uh that one of these companies uh one of these private companies SpaceX what have you um they can come and see a price chart for the security um understand you know the bid ask spread and have an idea right away of what the value is um of the shares uh that they're looking to sell which is huge huge Market lots of transactions big volume on a daily basis and that's even gonna get bigger as you're raising can you tell the audience about examples of some uh customers that list uh their um their shares on their private shares on the website yeah well look um obviously I can't really share uh specific identities but I can tell you that there's a

couple different types of categories of sellers so um you know employees of uh private companies are typically um frequent sellers uh former employees current employees you know people who got their options when the company was worth you know 10 20 million now it's worth 500 million one billion 2 billion uh and you know it's an opportunity for them to realize again in order to you know make

a major purchase or something like that like a house or something like um another category of sellers would be like an Institutional uh seller so something like an early stage fund uh who invested early on as well um and now is sitting on a massive uh paper gain you know these days I think um that the need or the demand for an alternative channel for liquidity is

much High higher because many companies are not going public right away public markets are shut in general but also companies have been staying private longer just because uh administratively it's it's oftentimes easier for them to manage a private company and so we're seeing a lot of interest from from those types as sellers um yeah and then on the buy side you are typically you have larger firms

on the buy side usually investment funds uh but some you know ultra high net worth individuals as well right and with the market trends I think it is more and more relevant more than ever to actually be able to um liquidate some of your positions uh in the VC world you know sometimes you can hold on for 10 even 15 years to position obviously a position will

grow but it I think it's just super essential and convenient to offer the option to folks to exit um out of there when they need it and reinvest that Capital somewhere else um with the recent Trends kovid uh this year inflation uh massive investments in AI but we've seen other Market freeze such as latam for example do you think that people are going to use uh more

your platform Hive markets or are they gonna use it less for that these trends um you know I think these Trends are all pointing um in favor of um you know using a Marketplace like this um you know I think buyers and sellers um appreciate in this environment in the current environment that um liquidity is you know at a premium uh obviously in the environment of rising

raids and other types of um shocks of the system that we've had I think that uh people are looking to uh looking at liquidity is more valuable than they have in the past so I think yeah I think the trend is I think the trend is is favorable towards us I think obviously the fact that um it's harder for for companies to get liquidity through a traditional

exit like an m a or an IPO right now um also again supports the idea that um this is kind of an alternative channel to relieve some of that pressure I'm curious though because if we look at the future and there's more and more of these platforms you know these private companies platform quote quote-unquote the regulation behind it because the question is if their companies are trading

pre-ipo why would we even need to go for an IPO if all of these platforms are public and obviously I think the government has an incentive to uh have the companies go public so is is the future full of these uh platforms where you can buy pre-ipo companies and with that even remove uh the need for an IPO yeah so like generally the reason um like all

of the like so the generally the reason for having an IPO in the first place is to achieve like uh even newer and higher level of liquidity than um you you could ever get in the past and so the thing about secondary markets as they're structured right now is you'll never get that level of liquidity in the secondary market and one of the reasons are there's some

legal and Regulatory constraints and I don't quote me on this but I believe that uh right now there's a limit of something like 2 000 shareholders uh for a private company at least in the U.S and Canada the rules are slightly different uh vast majority of our businesses in the US um the so what happens is if there's a limit on the number of shareholders of course

there's a limit on the total liquidity that you could have uh as as a private company now um that's hard to say that those rules couldn't change right it could change that uh and right now the other limiting factor of course is that sophisticated investors you have to have a sophisticated buyer or what we call an accredited investor in order to invest in a private company so

you'll never get quite the same level of liquidity in a private company as you would in a public company so I think eventually if a company really wants to have a very liquid market for its stock um then then the IPO is still a channel and I don't think this the secondary Market ever ever replaces it that way or it becomes a threat from a regulatory standpoint

either right there's still some downsides to IPOs uh it's it costs a lot it needs to be at the very right time we've seen total flops like wework for example disastrous IPO um why should a company go public and why should a company stay private yeah so you know um going public it has a huge benefit which is like I mentioned getting just a the the highest

possible level of liquidity oftentimes in the context of being a very very liquid stock your valuation Also Rises so something we've observed even in the secondary Market is stocks that are more liquid um rise in value so even in the private markets when a company is more liquid they let more trading happen their value tends to rise so same thing in the public market right after an

IPO you see a big pop in valuation that's primarily driven at least Theory uh by liquidity now on the flip side uh public companies have and of course the public market is a great source of capital for public companies right it's a very liquid source of capital um but you know on the flip side there you know there are a lot of rules associated with being a

public company um you know one of them is very deep and strict um disclosure requirements uh you know tighter uh constraints on um insiders selling and and the like so um so I think there are definitely are some downsides it can be really costly to be a public company um and I think that uh you know the other thing is that of course you're in for your

your information right your financial information um is is public uh once you're a public company so two big reasons for a company to stay private would be a you know much lower regulatory uh burden and be um not having to then open the door open the kimono so to speak in terms of their uh all of their financial information and performance information because it can you know

it can be a result in competitive threat uh if your competitors can see uh how you're everything you're doing if I'm a fund do you recommend that I balance my investments out between private uh pre-ipo and post IPO or should I focus just on one specialty and really Master uh that area um I'll be honest with you I'm not um really an expert on sort of whether

or not you're going to you know how to balance your portfolio between public and private you know of course in theory and the general theory is that um private Investments um have a higher risk but also a higher potential return that's why people invest in Venture Capital because it has a and private Venture Capital will have a higher return on average and at least historically uh public

companies are are are are more liquid and so there's a trade-off right there's a trade-off between um liquidity and returns so when you have less liquidity which is private markets you have higher returns because of the higher risk of the lack of liquidity and public markets you have generally speaking lower returns because of higher liquidity so I think that's the balancing act that somebody is going to

make but we do imagine we do predict that um you know wealthy investors especially especially wealthy individuals who have historically only been investing in public markets um as their main and perhaps real estate or something like that on the side um I I think I do think that private Market investment will start to become more of of their asset X so that they can get higher returns

and diversify into it what kind of info can I get on hive because yeah if the company goes public all their documents are Derek and sift through them I can feed them to my GPT and ask questions and make correlations with that data what can I get on the platform that would kind of de-risk or make me more secure to invest in private companies that's a very

good question and and it's uh it's a tricky one to answer I'll be honest with you um the reason is because public sorry private companies don't uh like I said before just have to disclose their financial information right and so uh generally speaking when we value companies especially public companies and public stocks we are able to look at their financials and talk about Trends and how their

performance is improving and so on and so forth that is generally like I said not available from private companies and so as a result we don't have a lot that we should we disclose um publicly on on that stuff um you know some things we can provide from which we collect from other sources public and private sources is things like you know which investors are involved in

the company uh you know uh the the last round price per share if it's available publicly um you know those type of valuation indications as to the valuation of the last funding round the last time they raised Capital uh but beyond that yeah it does require people who are willing to really roll up their sleeves do some of their own homework find their own source of information

or maybe they have a channel to the company itself where they were able to get some information as well from the company um so yeah that's that's definitely a barrier for for somebody who's going to be investing in private Market somewhat of a complex business you're managing there you have a pipeline as per who can get uh listed in there then you have the other side of

the marketplace which is who can buy so these are this is the sell side then you have the ux how the platform works you have legal how do you stay sane as a CEO and manage all of that at once yeah well um you know it's uh not easily but um at the same time I have to say that I have been really lucky to build um an incredible uh Co team of co-founders um on you know for the platform uh you know including uh Sarah Huggins our CEO and NGC uh proper town or head of capital markets and and Stuart Eccles um our our head of product and our CTO uh each of these uh co-fundors has such deep and uh domain expertise in what they're doing and uh brings such a unique I

mean but for any single one of them it would not have been possible to make this happen so um yeah I really rely on having a very very strong uh Partners to work with as well so how do you assemble that A-Team is it just pure experience pure past Network me I'm seeking to scale that how do I do that yeah so um you know uh Sarah I knew from past uh business enterprises and you know we uh just had clicked in the past really had some great success in the past um you know she's one of the best lawyers I know and a great operator at the same time so that was huge I that was fortunate that was just life experience that was you know uh 20 years of experience um and crab

you know again was my colleague at my prior firm and therefore you know um I knew him to be a real superstar in the space and again was fortunate to just cross paths with him at some point um Stu our CTO and header product a huge uh this is one of the I guess one of the wisdoms I would perhaps share with people who were looking to get into as a as a business side founder as somebody with domain expertise getting into um the tech world the building software um you know uh Sue I met as a actional CTO essentially through an agency talked to a ton of people we were going to Outsource the development of the product to a third party and we had heartburn over that because they wanted there was a

big price tag and then they wanted us to do a Sprint and we were like ah but what if at the end there's things that we want to change and this and that So eventually we ran into um Stu via a agency as a fractional CTO and and we just clicked right away he just understood what we wanted to do and um we we've just had great chemistry ever since so that was kind of half lucky half we we kind of did a pretty rigorous and extensive search before we settled on an option on the technology side so that was kind of that's kind of how that came about wow I I just have wild to say because I mean the product wouldn't be where it is today and it's totally different scenario I'm not

sure there's a lot of startups that are successful and do that that Outsource the full and Technical and product side so life is interesting right like how do you meet people and how things turn out um yes there's luck but I I believe there's a lot of control as well into this um hi view launched in 2021 uh so it's like almost two years ago is that correct uh that's right yeah well we we launched the platform officially actually about um 16 months ago uh well officially the platform launched 13 months ago we had a beta launch 16 months ago and uh we actually started working on Hive about two and a half years ago so just literally scribbling on paper you know uh an idea at that time and then you started building the

software about two years ago now and uh launched it 16 months ago that seems incredibly fast you know like uh how do you still have hairs on your head well you know it's um it's Asian experience um a lot of stress a lot of sleepless nights for all of us um sleeveless from stress Sleepless from work um but uh you know part of the um secret and you know one of the other wisdoms I have is aside from you know the idea of going with a fractional CTO if you're um if you're a business side founder is um is is just age age and age comes with with age comes wisdom and you know we are all uh one thing that makes our kind of founding team unique is that we're all people with um

long past track records of success in business um you know and uh I think that was one of the things that allowed us to move that wisdom that we've earned over the years allowed us to move a lot more nimbly and efficiently uh we were also able to self-fund um a very accelerated pace of um of building and um so yeah I mean you know we so far so good we're also extremely thoughtful so uh you know the old saying uh for construction workers uh measure twice to cut once um that that's our philosophy when it comes to product we want to move quickly but at each integral kind of step in decision making we're we're very thoughtful sometimes we tear it right back down where when we're already at the uh at the end

at the Finish Line just because we have doubts that this is exactly the best way to go about it and as a result we save so much time from having to kind of unroll big mistakes uh later on so I think that's kind of that that ties in with I guess the wisdom point but yeah right deploy fast but analyze the outcome and cut quick you know if it doesn't work cut cut the cut the arm literally sometimes or the finger because let's hope that the harm the arm haven't grown yet yeah how do you keep your team's morale up when everyone is down and we're not seeing the results we're not seeing that next funding round uh go as well as as it should we're not seeing uh users uh sign up we're not

seeing the sales numbers how do you keep your team motivated when that happens well luckily we haven't had that happen yet um we're uh you know we've been kind of up into the right since we since we started and um you know in spite of being in one of the most difficult environments for Venture Capital um you know we've we've we've been fortunate enough that our business

has just uh kind of grown from from day one and you know we're just we're celebrating all the time um actually another thing that's unique about our firm is the fact that uh we're entirely in person almost entirely into person I should say we're about um 90 in person and I I do believe that that makes um uh has a huge impact on morale uh we have so much energy in the office you know the people that work here are people who want to be here um their preferences to be here and so they selected themselves uh to to come and I just think that also contributes a lot to sort of the everyday energy of like our our sharing our accomplishments um and being able to collaborate in person and that kind so we're

big Believers in in that well they're just on a rocket ship you know and when you're on a rocket ship well it's fun you enjoy the view and you don't ask like why am I here you know you're like hell yeah I made a good decision I guess um yeah last last question what's uh in it for you guys this year there's five months remaining to this year what are the priorities uh so you know we're continuing to we're still early innings in terms of um you know owning the marketplace for these Securities it's a competitive space um I think we're lucky that we have um the most sort of comprehensive technology that is exists out there we've got a product that is a true trading product and uh it's something that our competitors don't

have and as a result you know I do believe we have an advantage uh we're not going to get complacent we're going to keep sprinting we got to keep pushing pushing pushing pushing out new features we've got a number of new features in the work we actually just introduced we just launched a new interface for um sellers who are not accredited investors so for the first time

ever someone who's not accredited can come onto our site sign up post their Securities for sale and then entertain an offer directly from one of these institutional sophisticated buyers um and so that has been boost uh since we launched that about two weeks ago we've seen user activity and sign up Surge and we haven't even promoted it yet so we're very excited about that uh and um

yeah we're we're going to be continuing to launch a new features with the common theme of maximizing liquidity on the platform that's that that's the constant kind of our constant obsession so I want to throw a wild one here for the the last segment how does it feel to compete against uh Sim And Hive hopefully very painful you know um we are uh you know we move

very quickly we're very thorough we're very rigorous um we're aiming to cut costs by reducing fees we're gonna make it uh you know it's it's gonna be painful to be a competitive Hive um you know and I can feel that it's not without cost though right when we've we've made the choice to uh to really go hard at this and um uh you know and and that's uh hopefully we read the rewards very inspiring dude where can people find out more about you and uh so hivemarkets.com uh with 2i so h i i v e market.com um and uh that is our website uh you can also check me out on LinkedIn uh just simply say