Hello -- founder of Preferred Return (the valuation firm behind this offer that is partnered with eShares) here. As appraisers we cannot own equity or any economic rights in the companies we value.
That makes perfect sense, but it isn't owning equity in the companies that is valuable, rather it is the knowledge of both the current value and change in value of a material number of startups in a particular space.
Today there are a number of research companies that use this exact same information, as reported by public companies as part of those company's obligations to the SEC, to evaluate investment risk and opportunity. Their services go from 'free' (as in Charles Schwab will send you a copy of their research department's report on a company or a segment if you're an account holder) to 'extortionate' which some of the larger trading houses keep in their back pockets to help them pick winners and losers.
As a collection point for this information about privately held companies, it puts you in a nearly unassailable position to do research on which of these companies are likely to be successful or not (your own sort of buy/hold/sell ratings) This isn't even possible today because, as the article mentions. everyone goes to different places to get their 409A valuations. So no single entity has enough of the puzzle to assemble a recognizable picture, yet by offering this valuation service, and attracting a very large number of customers, you create the opportunity to be that single source of information.
I would venture a guess that there are venture capitalists that would pay handsomely for a 'peek' at the state of the industry 'yet to come' as it were. That would not involve you (Preferred Return) owning any equity in any company, all you'd need to do it offer up research reports at $500,000 a copy describing the state of the industry :-)
I am in awe of how amazingly clever this whole scheme is!
Because we want to continue to run a respectable business, and staying in business depends on our clients trusting us, we have no incentive to pursue a data-based revenue model. We are a service provider, like an accountancy or a law firm, not a software or data company.
To do what you propose would involve trading our large, primary revenue stream for an untested one-shot reporting product that would be extremely unpopular with everybody and put us out of business overnight. It makes little sense to me. You draw analogies to public markets, but there's a reason private companies are called private companies.
In addition to our standard engagement terms that forbid such use of client data, we are happy to sign customer NDAs and regularly do so. We have never earned a cent from client data and have no intention of doing anything of the sort.
Happy to discuss over the phone if you have any further suggestions on this front.
> As appraisers we cannot own equity or any economic rights in the companies we value.
I don't think Chuck was referring to you personally, since that would be a magnificently foolish thing to do. He was probably referring to the possibility of a wink or a nod to certain family members, or perhaps even to a friendly VC that sends you deal flow.
Once again, I'm getting downvoted for illustrating how the vast majority of insider trading goes on unprosecuted. I'm not alleging it in this case, I'm merely pointing out that it's possible.
I'm not sure what your point is. I never made a statement about the percentage of insider trading that was identified, nor did I suggest that most people engaged in insider trading were caught. I merely pointed out the logically obvious: a lot of the people caught engaging in insider trading probably didn't believe they'd be caught.
The point of confluence's recent comments it to highlight the obvious (or I thought it already was) fact that if it can happen, it will happen. Laws of men are not laws of physics, they don't apply unconditionally and immediately.
I mean come on! If you're going to do something illegal do it with some god damn panache; multiple separate accounts, multiple people, smaller orders, stock only, no paper trails, cash transfers, etc.
Yes, because who wouldn't want to use the services of an appraiser who is going to sell your company's most sensitive financial information to third parties?
I for one refuse to work with an accountant who refuses to sell my tax returns on Scribd.
The issue is someone could conceivably sell the information without your knowledge, or create aggregated data products from that information which aren't so clearly "your information", like "this is where you are compared to your industry as a whole, based on deals we've seen" (which is probably ok).
Because of this, there needs to either be a regulatory control to prevent it, or serious effort from the valuator to convince customers their data is being handled safely.
So I shouldn't use sarcasm because some people don't care for it?
> Because of this, there needs to either be a regulatory control to prevent it...
Do you know if appraisers are considered fiduciaries? Do you know if any of the societies appraisers commonly belong to have codes of ethics that would prevent the use of client data in any of the ways you describe? I don't, but I suspect that if you were really interested, you could find out in 10 minutes using Google. That would seem to make a lot more sense than screaming "Regulation!" before you knew what appraisers can and can't do currently.
That notwithstanding, I'm always amazed at how quickly folks overlook the importance of trust and reputation in professional service businesses. Do you realize how fast an appraiser would destroy its business if its clients learned that it was using their most sensitive financial information in an unauthorized way?
This is like saying someone who lots of insider information about a particular company is "sitting on a gold mine". Insider trading laws exist for a reason.
I was trying to suggest that the data they are collecting is rather valuable. They don't have to exploit the data (I believe them when they say they won't), but if it were to "escape" then someone could certainly make use of it.
This, and because of this "goldmine" they will become a target for blackhats who will try to get their data. There are people who would pay in megadollars for that data (or even aggregate reports), so there's an incentive, and there's a market.
Exactly right. Sort of like BitCoin exchanges with hundreds or thousands of coins in a 'hot wallet'. It cannot help but attract those who would do anything for a few bucks.
