Three-year-old eShares digitizes paper stock certificates along with stock options, warrants, and derivatives to create a real-time picture of who owns what at a startup. It also makes it far simpler to transfer ownership of all of the above — which goes a long way in explaining the company’s traction. The Mountain View, Ca.-based outfit right now maintains the cap tables of 1,500 companies, including Slack and Blue Bottle Coffee, and says it’s adding 200 more companies each month. Perhaps more important, eShares has won the trust of roughly 35 law firms, the gatekeepers for most startups and their paper certificates.
But eShares — which has just raised $17 million in Series B funding at a post-money valuation of $77 million from insiders like Spark Capital and Union Square Ventures — isn’t just racing to win over tech startups. Now, the 42-person company wants the rest of the world’s still-private small and mid-size businesses on its platform, too.
We talked with cofounder and CEO Henry Ward about his big plans yesterday.
As of last year, eShares charged companies $159 a month or roughly $1,900 a year to maintain an ongoing valuation. It also charged a $20 fee every time a company issued a new grant and another $20 every time someone exercised the sale of one of their holdings.
That hasn’t changed, and the model works well at the early stage, though a lot of our larger customers go to an all-you-can-eat annual subscription model. We don’t publish the pricing (publicly) but that typically happens when companies hit 50 employees.
Worth noting: Employees on eShares can hook up their bank account to their eShares account and self-exercise their options and we wire the money straight to the company, as well as issue the employee new stock certificates. It’s much easier than the normal paper exercise, where employees have to get the company to process [the transaction every time they want to exercise their options].
You must have pretty good insight into what’s happening in terms of secondary sales, too. Are you noticing more shares selling to insiders versus third parties or vice versa?
I can’t talk specifics, but secondaries are getting a lot of attention. We joined forces with [the secondary investment firm] Industry Ventures [which participated in eShare’s new round] to work on streamlining the process and bringing more transparency to it.
As an investor, does Industry Ventures get “first dibs” on secondary sales where you’re helping companies facilitate their movement?
For more of our conversation with Ward, click here.