A Powerlaw Corp fund, which holds stakes in Anduril Industries, SpaceX, OpenAI, and Anthropic, is applying to list shares in New York. This move would grant retail investors an opportunity to gain exposure to the growth of leading unicorn companies in artificial intelligence, defense, and aerospace sectors.
The fund is part of the Powerlaw Capital Group and is operated by San Francisco-based Arcadian Ventures. It specializes in acquiring shares of private companies from existing investors. In a statement released on Tuesday, the firm announced it manages over $1.2 billion in assets. The listing plan has been submitted to regulators but still requires approval from the U.S. Securities and Exchange Commission (SEC) before proceeding.
Individual investors in the U.S. have long been excluded from the exponential growth seen in companies like OpenAI. OpenAI is currently negotiating funding rounds at a valuation as high as $830 billion, a dramatic increase from its sub-$30 billion valuation just a few years ago. By the time such companies eventually go public, a significant portion of their value appreciation has often already been captured by large venture capital firms or company insiders. Powerlaw is part of a new wave of investment vehicles designed to bridge this gap for ordinary retail investors.
John Spinello, Managing Partner at venture firm Jazz Venture Partners and an investor in Powerlaw, commented, "With abundant capital available in private markets, the highest-quality companies are no longer choosing to go public. This deprives the general public of the chance to invest in high-growth enterprises."
The fund's name references the power law distribution effect common in venture capital, where a very small number of companies generate a disproportionately large share of industry returns. Through secondary market transactions, the fund has invested $355 million across 18 of the world's highest-valued private tech companies. Its investment methods include direct purchases, share purchase agreements with employees, and participation alongside other small investors through Special Purpose Vehicles (SPVs).
The fund has opted for a direct listing. This means that, unlike a traditional IPO which involves issuing new shares to raise capital, only existing shares held by current shareholders will be sold. Upon receiving regulatory approval, investors will be able to purchase the fund's shares on public markets through their brokerage accounts, similar to trading any other listed stock.
This structure also benefits Powerlaw itself. As the number of unicorn IPOs declines, venture capital and early-stage investors face challenges in converting paper valuations into cash returns. By listing, the company gains access to a broader investor base. If market performance is strong, it could also raise new capital for further investments. The fund also plans to charge shareholders a 2.5% management fee.
Risks associated with this investment include the tendency for closed-end funds like Powerlaw to trade at prices below their Net Asset Value (NAV). The company's prospectus cautions that even if the underlying portfolio performs well, the share price may not fully reflect this performance. It also warns that the private companies it invests in have limited public information and are not required to disclose detailed financial statements.
According to SEC filings, the fund's net asset value was approximately $475 million as of the end of last year.
Historically, the vast majority of U.S. retail investors have been barred from private markets, which typically require a net worth exceeding $1 million or an annual income of at least $200,000 to participate. Alternative asset managers are now pushing to open up private market access to the general public.
The bankruptcy of Linqto, an investment platform that previously allowed retail investors to access shares in companies from SpaceX to Anthropic, highlights the risks inherent in private markets. That platform operated by using SPVs to acquire shares and then selling portions of the SPV to its clients.
Powerlaw holds its positions in portfolio companies through various instruments, including equity, convertible notes, SPVs, and forward contracts.
James Seyffart, a Bloomberg Intelligence analyst, noted, "Private assets and public markets are converging. There is growing demand for public vehicles to access private company investments, with different approaches offering various trade-offs."
Some of Powerlaw's holdings carry higher risks. For instance, an SPV that helps investors participate in funding rounds for hot startups might be separated from the underlying assets by multiple layers of ownership if its shares are further subdivided. Forward contracts, such as agreements to buy shares from departing employees or after a company IPO, can be hindered if the company exercises a right of first refusal.
A similar closed-end fund, Destiny Tech100 Inc, listed in March 2024. At the time of its direct listing, the fund held stakes in 23 private companies valued at approximately $52.6 million. Its shares opened at $8.25, peaked at around $105, giving it a market capitalization exceeding $1 billion, and currently trade near $30.
Several closed-end funds also exist in the UK, including Chrysalis Investments and the Scottish Mortgage Investment Trust, managed by Baillie Gifford. The latter holds stakes in companies like SpaceX, TSMC, and Stripe. Since 2023, its shares have traded at a discount of approximately 20% to its NAV. Since 2020, its performance has still surpassed 95% of its peers.
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