DEX for Startup Equity

Ali Moiz
3 min readMar 26, 2022

Much of blockchain/crypto is a solution looking for a problem.

But some things are clearly working — DeFi yield farming, Inflation hedges, stablecoin ramps, cross-border payments, DAOs, and NFT speculation.

In startup investing, we often hear of Angellist —that just raised a Series B from Tiger at a $4bn valuation.

But Forge Global — a firm few have heard of, that facilitates secondary trading for pre-IPO startups — just went public via a SPAC on the NYSE yesterday. By some estimates, the secondary trading market may be larger than the primary market for startup equity. That is certainly the case for public equities.

❗️BIG Problem: Silo-ed Demand within separate Communities

Demand is silo-ed between investors in various communities that are walled-off from each other — Angellist Transfers, Forge Global, EquityZen, Sharespost etc. An allocation in Stripe on Forge is only available to investors on Forge, for example. This works for names that everyone wants to buy (such as Stripe, SpaceX), but it doesn’t work for names that only a few want to buy. There is just too much demand fragmentation.

🤔 Imagine if this happened in the public markets: Robinhood users could only trade with Robinhood users, Etrade with Etrade, Schwab with Schwab. It would work OK for Large Caps like Apple, Google and Tesla, but what about Etsy, Fiverr and Twilio? What about that $200m micro-cap growth stock? How would the market clear for smaller and less well-known names?

It wouldn’t clear efficiently. Or clear at all.

This is the situation today in private markets.

Everyone has built silo-ed communities of investors that they carefully guard and wall-off from others. In the Web2 world, liquidity and investors are a precious asset that are proprietary to a platform.

Totally inaccurate marketshare numbers, but you get the idea 👆

Ooof 🤦‍♂️

DEX: Enabling peer-to-peer Equity Swaps

An open-source, DEX — customized for startup equity — could enable collaboration between all these platforms, creating a single-market for secondaries.

When markets are larger, more open, more inclusive — everyone wins.

A DEX could reward platforms that drive users and liquidity to the DEX in tokens, solving for incentive alignment. Web2 platforms could drive users, and earn tokens for revenue and governance with little to no pre-mine.

These platforms could also act as gate-keepers, restricting trading to accredited investors only (a big regulatory issue). Another way to solve for legal would be to make the equity swaps entirely decentralized and peer-to-peer, hosted independently on decentralized Layer 1.

Equities could be tokenized and shares made fungible. Complicated contracts could simply be one-off NFTs.

Big issues would arise around ROFRs, diligence, standardization, cap tables, bearer assets, KYC/AML. But these are solveable, as long as fragmentation of demand is solved.

This feels like one of those cases that has to be crypto-native, and cannot be done without crypto.


Follow Ali and Stonks on Twitter.
Palo Alto, CA. March 25th.



Ali Moiz

Sandhill Markets. Streamlabs. Peanutlabs. Trying to build stuff people want.