Mizuho, MUFJ Morgan Stanley Securities, and Nomura invested in Smart Round

SmartRound has formed a capital alliance with Mizuho Financial Group (Mizuho Trust & Banking), MUFJ Morgan Stanley Securities, and Nomura, with the aim of jointly building a platform to optimize secondary trading of stocks issued by unlisted startups.

Background

Since the 2000s, the average time from founding to exit has increased from 7 years to 14 years in the United States, as an increasing number of startups have sought growth while maintaining agility without going public. This has led to a surge in the secondary market as founders and other startup executives and employees, as well as VCs managing 10-year maturity funds, have sought liquidity in unlisted stocks.

Although there is a similar need in Japan and transactions are actually conducted behind the scenes on a bilateral basis, there are no intermediaries, so market mechanisms do not work and transaction prices have been significantly distorted.

In secondary transactions, an issue is that even though the issuer startup does not receive any funding, the procedures required for the actual transfer of unlisted shares, such as transfer approval and confirmation of first refusal rights, are a major burden.

About this capital alliance

Smart Round will work with Mizuho Financial Group, MUFJ Morgan Stanley Securities, and Nomura to build a platform that will use digital transformation to streamline the practical aspects of secondary trading of unlisted startup shares and improve the profitability of intermediaries.

In addition, the partners will provide a mechanism to reduce the burden on startups in secondary transactions by making maximum use of the existing functions of smartround, a data creation and management platform for startups and investors provided by Smart Round. In particular, the partners will simplify the procedures for various institutional decisions such as prior approval, board of directors, and general shareholders meetings that are necessary for secondary transactions, and also automate the calculation of transaction conditions through functions such as capital policy and stock price valuation based on it.

Takeo Shiino, Executive Officer, Head of Equity Strategy Division, Mizuho Trust & Banking, said: “While supporting startup companies recently, we have become concerned about distortions in Japan’s IPO market, namely, while there is a fair amount of capital supply from VCs and others in the early and middle stages, the supply immediately before the IPO is extremely low and there are almost no suppliers. We have also heard many voices from startups such as “We have given SOs to employees who have contributed a lot, but we cannot cash out unless we IPO, so we have no choice but to rush the IPO”, “VCs are telling us to IPO before the fund deadline”, “We have been underpaid for many years and have taken on risks, forcing our families to do things that are difficult for us, so we want to cash out our shares quickly and stabilize our lives”, and we are strongly aware of the need for a secondary market in Japan.”

Hidekazu Kamisaku, Executive Officer, Corporate Finance, Nomura Securities, commented: “Based on our strategy of “expanding and strengthening in the private sphere in addition to the public sphere,” our Group has been continuing to work on creating capital circulation that contributes to the growth of unlisted companies, such as by starting to handle unlisted company stocks using Japan Ships (J-Ships) and private investment trusts that invest in these stocks. However, we believe that even broader efforts are needed to support further growth. With the development of startups being a pillar of national policy, we are very pleased to be able to participate in Smart Round’s new initiative to “build a secondary platform.” We will contribute to the realization of a world in which startups drive new innovation and become the drivers of economic growth.”

What is smartround?

Smartround is a data creation and sharing platform to streamline interactions between startups and investors. For startups, it provides services to streamline shareholder meetings, capital policies, stock option management, etc., and for investors, it provides services to streamline fund-related tasks such as sourcing, investment management, performance analysis, and reporting. Currently, it is used by over 5,700 startups, and its paid services for investors and advisors are used by over 70 organizations.

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