Annualized Returns per underlying company outcome ranged from a loss of 100% to a gain of 430% as of 30 June 2020
EquityZen’s affiliate, EquityZen Advisors (EZA), sponsors and forms a single purpose limited liability company (an SPV) to hold the restricted securities of a private company. Qualified investors familiar with the risks and rewards associated with investing in the securities of private companies and able to bear the associated investment risks, including the risk of a loss of their investment, may invest in the securities of such an SPV. Each SPV holds the equity of only one private company. The SPV is the owner of the shares of the underlying company and the qualified investor owns an interest in the SPV. We summarize below under “Risks” the risks associated with investments of this type.
From time to time, the underlying private company the securities of which are held in an SPV may determine to enter into a merger or sale transaction, to undertake a direct listing, to undertake an initial public offering, or to undertake another liquidity event. Not all underlying private companies will undertake a direct listing, initial public offering or other liquidity event, and not all such events will result in successful investments. See “Risks” below. In any event, EquityZen has no discretion over any such monetization event. The SPVs remain in place until such an event occurs.
IRR for Exited Companies Held Through SPVs, Net-of-Fees
The height of the bar for each company represents the IRR realized for an investment in that company, net-of-fees. 39% of exited companies experience negative returns net-of-fees, while 61% of exited companies experience positive returns net-of-fees.
The annualized return information provided is provided solely for illustrative purposes. For illustration, $10,000 invested in a portfolio with an annualized return of 26% would generate gains equivalent to $2,600 per year. The annualized returns presented are across 159 single-company vehicles in 38 companies that have had exits since 2015, with an average hold period of 17 months. No individual vehicle achieved exactly the average annualized returns. Investments in individual vehicles may have annualized returns and hold periods that are higher or lower than this average.
You should not place undue reliance on IRR or annualized return calculations. We provide these for illustrative purposes, and you should regard these metrics as indicative of general trends and as subject to numerous limitations. Any calculation of IRR entails certain assumptions, such as, for example, an assumption that any distributions, if any are reinvested immediately, that investments are made and held continuously, and also a certain compounding of returns. Similarly, a calculation of annualized returns also assumes certain compounding. There are many factors, outside of our and your control, which affect the potential and actual returns that you may expect in connection with any investment, such as market conditions and the timing of any exit.
Information shown above regarding realized returns, on a time- and dollar-weighted basis, net of fees, is provided for informational purposes only and is calculated based on exits for those SPVs owning share of underlying companies that have had exits.
Performance for any individual SPV or underlying company may not be consistent with the overall information shown above. Each underlying company will be subject to particular risks associated with its sector, its management, and other factors, which will be described in detail in connection with an investment in the securities of that company. Historical performance, particularly short-term performance, is no guarantee of future returns. Investment returns will vary over time, depending on many factors outside of our and outside of your control, including, but not limited to, overall economic conditions.
Returns on actual investments also will fluctuate depending on the timing of your investment, the length of your holding period, and the timing of a liquidity event, if any, for the particular company, among other factors. As a result, individual investors may experience a gain or a loss on their investment. Return information gives no effect to tax treatment. Consequently, you should not place undue reliance on the return information, which may not be representative of any individual investor’s experience, and which is provided for illustrative purposes only.
Current performance for any individual investment may be higher or lower than the performance data shown above.
Any investor who engaged in sales of their interests at prices above (or below) the exit price of the vehicle may have received a lower (or higher) investment return and paid additional fees (typically 5% of the sale amount). Any investor who purchased existing investors' interests at prices above (or below) the entry price of the vehicle may have received lower (or higher) investment returns and paid additional fees (typically 5% of the purchase amount).
All investments are subject to risks and you should read carefully the offering materials related to any particular proposed investment. For example, you should consider that:
- Investments in the single-purpose vehicles are not diversified investments;
- You will have limited rights as an investor in a single-purpose vehicle;
- The securities will be restricted securities and will not be readily transferable;
- The securities of private companies are subject to heightened risks;
- Private companies are not subject to regulatory oversight and supervision by the Securities and Exchange Commission or by a national securities exchange;
- A private company may not have formalized corporate governance policies and procedures;
- A private company may not have ready access to capital or to funding and may not be able to withstand economic downturns;
- Investors in the securities of private companies must be willing to suffer the loss of their entire investment;
- Many private companies fail long before they are able to pursue a liquidity event, like an IPO, direct listing, or M&A opportunity; and
- Many private companies will not adequately provide for D&O and other insurance.
Distribution of Company Exit Statuses
The distribution presented is for the 175 companies that EquityZen’s single-company investment vehicles have invested in since 2015. 38 companies have experienced an exit event, such as a liquidation, acquisition, or went public via IPO, direct listing or merger with a SPAC. Not all exit events will result in a successful investment. 137 companies that EquityZen investment vehicles have invested in since 2015 are unrealized investments.
- "IPO" and a year refers to an underlying company that conducted a public offering of securities in the listed year, and includes a direct listing.
- "Acquired" refers to a company that was purchased by, or merged with, another company.
- "SPAC" refers to a company that went public through its acquisition by a special-purpose acquisition company.
- "Shut Down" refers to a company that ceased operations without being formally liquidated.
- "Unrealized Investment" refers to a company that has not yet achieved a positive or negative exit event, and the results of which are unknown.
Not all companies that were Acquired or that conducted an IPO or a SPAC resulted in a successful investment. A company that was Shut Down or Liquidated resulted in a complete loss of investment.