How does Caplight determine a company's valuation for transaction parties, and how does it prevent the exploitation of insider information by funds?

It's a very important consideration for the secondary markets in general, but also for Caplight specifically. Building a derivative layer on a market that already exists almost compounds the need for something resembling information symmetry amongst all parties. It's something we've spent a lot of time thinking about.

I think that part of what we're doing with starting institutional only is acknowledging that institutions have better access to the information that's required to form an investment view than the retail investment community. We want to start there because we've identified a massive need with that client type and believe that they're an underserved community, despite all the resources that they have. But a part of that decision is also, as I mentioned, acknowledgement. These are going to be the groups who are able to have a better view on how a company is performing and to formulate an investment idea based on that view. On top of that, they will have more resources to be able to assess what the current spot price is on that asset, which is a very necessary input into deciding where you want to buy and sell a derivative on that asset.

We're starting with institutional to give ourselves a little bit more time to figure out how we make our marketplace work for the retail community. We don't want to barge into the retail community without having solved the information asymmetry gap, because it wouldn't serve retail clients in the way that they should be served, and I don't think the SEC would like it very much.

But it's not acceptable for us to just say, "Well, institutions will figure it out. They'll get the information, and our job is done here by just serving institutions." That's not an acceptable answer either. So we are working this information asymmetry from a company fundamentals perspective, meaning, “How do I know what the value of a company should be based on the performance of that company?” That in itself is a massive problem, and it is not the core problem when it comes to private market investing. It is not the core problem that Caplight is trying to solve. So what we're doing is we're finding really forward-thinking, innovative groups that are making that their core problem -- shameless Sacra plug. We're really excited about partnering with groups like Sacra, who can be a voice of thought leadership in this asset class and who can provide the market much needed information that starts to resemble transparency into how a company is performing.

Now, that information is not always perfect in the sense that it's still difficult to get the information directly from the companies, but at least you have a professional that is a dedicated research analyst pulling in every piece of possible information that can be pulled in and turning that into a nice output of, "Here's how to use this information, what to make of it, and how to formulate a view as someone who wants to be an investor or even is already a shareholder and maybe wants to be a seller." The market needs more of that. We're looking for it. I mentioned Sacra and also groups like Data Lagoon. PitchBook and PrivCo are sort of obvious in terms of their coverage of the asset class. That's a big mandate that we have at Caplight: finding the best companies that can partner with us and help decrease this information asymmetry gap that is holding back the private markets generally.