Caplight Enables Private Stock Derivatives
Javier Avalos, co-founder and CEO of Caplight, on building synthetic derivatives of private stock
Caplight is making the case that private markets are maturing from a one way warehouse for risk into something closer to a real capital market. In the old setup, an investor who bought private shares was stuck until an IPO, acquisition, or rare tender. Caplight’s bet is that late stage private stock needs the same tools public investors expect, meaning a way to hedge, trim, or add exposure without forcing an actual share transfer every time.
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That gap existed even as the market got very large. Private shares changing hands were estimated at about $30B per year against roughly $1.5T of venture backed private equity value in 2020, and only a small slice of that stock was liquid in any given year. A market of that size staying buy and hold only is exactly the inefficiency Caplight is targeting.
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Most incumbents were built for spot transactions, not portfolio management. Forge used forwards to create liquidity when direct transfers were hard. EquityZen pooled shares into fund structures so smaller investors could buy in. Zanbato connected institutional brokers to execute large blocks. Caplight sits one layer above, using pricing data and broker connectivity to let institutions trade economic exposure and eventually hedge it.
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The strategic implication is that private stock starts to split into two products. Long term investors and company aligned holders can still own the actual shares. More purely financial investors can trade exposure, baskets, and hedges without crowding the cap table. That makes private markets easier for institutions to underwrite because they can manage risk instead of taking a blind multiyear lockup.
Where this heads is toward a fuller market stack for private companies, with cap table systems as the ledger, brokers as distribution, pricing networks as data rails, and derivatives as the risk management layer. If that stack forms, more institutional capital can treat private stock less like a special situation and more like a portfolio asset, which should deepen liquidity around the biggest late stage names first.