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I sit down with Sohail Prasad, CEO and Co-Founder of Destiny and Co-founder of Forge (NYSE: FRGE). Destiny is creating a family of exchange-traded products that will enable anyone with a brokerage account to invest in publicly traded portfolios of private technology companies.
Their first and flagship product, the Destiny Tech100 (NYSE: DXYZ), will be listed on the NYSE in March 2024 – it will consist of a portfolio of some of the top venture-backed private tech companies, including SpaceX, Stripe, OpenAI, Chime, Klarna, Brex, and more.
In this episode, we discuss:
The importance of democratizing private company investing
“This definitely wasn't possible, five or 10 years ago, and it's not even a question of technology. It's just the market liquidity wasn't there, it was far too fragmented, there was not enough infrastructure.”
Traditionally, investing in private tech companies has been the preserve of venture capitalists and accredited investors, leaving the average investor on the sidelines. Destiny's approach aims to make investing in private tech as accessible as buying into a publicly traded index like SPY or QQQ. By creating a product that is liquid and traded on an exchange, Destiny will enable everyday investors to participate in the growth of top private tech companies without the need for a specialized account. The company recently received approval from the SEC and will start trading their flagship index, Destiny Tech100, on the NYSE in March 2024.
Building the Destiny Tech100 and defining its rules and company inclusion criteria
“The goal behind Destiny and the genesis was really taking it from the top - what is the dream product? And. for me, it kind of looked like SPY or QQQ, but for private tech. And that's what we set out to achieve.”
Destiny's innovative approach to creating a fund that balances passive and active investment strategies addresses the liquidity challenges in the private markets. By setting a set of inclusion and eligibility criteria similar to those used by the S&P 500, and allowing an Investment Committee to make final decisions, Destiny has tried to design a rigorous selection process. This methodology allows Destiny to avoid the inefficiencies of being a forced buyer or seller and instead focus on achieving the best execution for the fund and its investors.
Lessons from building Forge and going public on the NYSE… and a lot more!
“I think being capital efficient is super important. Now, companies can be capital efficient by choice. They can also be capital efficient by force, if there's no capital that's available for them to raise.”
The tech boom of the 2010s, peaking in 2021, saw companies raising increasingly large funding rounds, leading to a culture of spending big on experimentation and marketing. However, Prasad highlights a shift towards capital efficiency, emphasizing its role in fostering sustainable growth. By being capital efficient, companies are compelled to focus on building solid fundamentals rather than pursuing growth at any cost. This approach ensures that resources are allocated more carefully, encouraging lean operations that prioritize finding and refining true product-market fit before scaling. Capital efficiency acts as a litmus test for product-market fit, preventing companies from masking inadequacies with excessive spending. In essence, it forces startups to validate their value proposition and business model rigorously, ensuring that growth is driven by genuine demand and operational viability rather than by the sheer force of capital.
Sohail also points out that capital efficiency can be a choice or a necessity, especially in times when funding becomes scarce. The recent focus on capital efficiency reflects a broader trend towards building real, fundamentally strong businesses amidst uncertain economic climates. By adopting a capital-efficient approach, companies not only stretch their runway but also enhance their resilience against market volatilities. This strategy prepares businesses to weather periods of financial drought and emerge stronger, having developed a culture of innovation and efficiency that leverages limited resources for maximum impact. In an era where capital can suddenly become tight, the ability to operate efficiently not only safeguards a company's future but also positions it as a prudent and attractive option for investors looking for sustainable investments.
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Sohail Prasad, CEO of Destiny - Democratizing Private Investing in Companies like SpaceX, Stripe, and OpenAI