Close-up of Databricks company logo on building facade, Rincon Hill, San Francisco, June 7, 2024.
Smith Collection/ gado | Archive Photos | Getty Images
Clear Street, the prime brokerage startup that recently shelved plans for its own IPO, is now aiming to give investors access to some of Silicon Valley’s hottest private companies before they go public.
The firm is close to announcing a new platform designed to let accredited investors buy interests in late-stage private companies, starting with AI software titan Databricks, valued this month at $188 billion, CNBC is first to report.
“The goal is to remove friction and give more people the ability to invest in more products,” Uri Cohen, CEO and co-founder of Clear Street, said in an interview. “A lot of the wealth creation has been in private markets, and more and more retail investors and smaller investors want to be part of that.”
More startups are staying private for longer, meaning much of their value creation is taking place before an initial public offering. That has fueled growing demand from rich investors seeking exposure to companies like Databricks, Anthropic and OpenAI before they debut on public markets.
Last week, CNBC reported that Goldman Sachs has created a new platform to expand its offerings for wealthy clients and family offices who increasingly want direct stakes in fast-growing private companies.
While Clear Street’s pitch centers on democratizing high-growth tech, the mechanics of the deals highlight a tricky reality in today’s private markets: Databricks isn’t directly involved.
Instead of buying stock issued by Databricks, Clear Street investors acquire an interest in a special purpose vehicle (SPV) that holds a stake in a third-party fund that owns the shares.
To Databricks, the shareholder of record remains that external fund, where they remain legally parked, according to Clear Street.
Earlier this year, AI startups like Anthropic cracked down on unauthorized secondary transfers, voiding unapproved SPVs and indirect share sales that bypassed corporate transfer rules.
Cohen, the CEO of Clear Street, said that his firm, as counterparty, would stand behind the deals: “If there is a risk, we are taking it.”
For its part, a Databricks spokesperson said in an email that the startup “does not have any engagement or relationship with Clear Street.”
Bond sale, 2027 IPO?
Clear Street will have as many as 30 startups on its platform by yearend, mostly tech firms in the $5 billion to $20 billion valuation range that are roughly six months to two years out from an IPO, Cohen said.
To support the push, Clear Street is also launching dedicated private company equity research headed by analyst Owen Lau, in what Cohen called an effort to bring public-market-style transparency to traditionally opaque private markets.
The expansion comes at a key moment for Clear Street, itself.
The firm, which was last valued at nearly $12 billion in a private funding round earlier this year, in February paused its own IPO plans amid broader market volatility that hit broker and fintech multiples.
Despite putting its listing on hold, the firm is cash-flow positive and bolstered its liquidity with a $400 million investment-grade bond offering, giving it the runway to build out its private market infrastructure, Cohen said.
“We’re in a position of strength, so the decision was shelved for better timing,” Cohen said. “We’re definitely going to look towards a ’27 listing, depending on the market conditions.”