Tracking the value of private companies with this new index

The NYSE OPEN Venture Capital Unicorn Index (^NYSEOVC) tracks the daily valuations of private companies, with SpaceX, OpenAI, Databricks, Stripe, and Fanatics being the top five largest companies of the 50 the index tracks.

OPEN Co-Founder and CEO David Shapiro sits down with Julie Hyman and Josh Lipton in-studio to shed light on how the index works.

"There are folks who've been trying to create indices out there who rely primarily on fundraising data," Shapiro explains. "We took a different approach and what we've done is worked with ICE, the NYSE parent company [New York Stock Exchange], to create a methodology that incorporates real secondary transaction data. So we understand where these companies are trading in the secondary on a daily basis. And using that significant breadth of data can actually price them on a daily basis."

Shapiro comments on the index's future with hopes to eventually launch an ETF:

"It's very important with our partnership with the New York Stock Exchange that we introduce structures to the market that can increase access, but in a robust, reliable, and really trusted way. We don't want to rush something to market that doesn't meet that really stringent criteria. And so stage one is launch this index."

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Luke Carberry Mogan.

Video Transcript

A company called Open has launched a VC index in partnership with the New York Stock Exchange.

The fund is called the Nyse Open Venture Capital Open Venture Capital Unicorn Index.

It gives an insight into where these private companies are valued on a daily basis.

And for more, bringing in the creator of the index, David Shapiro, he's co founder and CEO of Open.

Thanks for being here.

Thanks for having me.

So we are always in the press and people who are follow these private companies, we always want to know how much they're worth at any given moment.

So how do you and your company figure out how much they're worth and then create this index as a based on that.

So that was the real challenge in creating an institutional grade index that affords retail investors, institutional folks alike access uh affordability and ultimately trusted insights into these private companies.

Now, there are folks who've been trying to create indices out there who rely primarily on fundraising data and they'll say something like, hey, a large company raised a big round a few years ago.

Let's do some financial analysis and figure out where public comps would have that company if it were to be priced.

Today, we took a different approach and what we've done is worked with Ice the nicest parent company to create a methodology that incorporates real secondary transaction data.

So we understand where these companies are trading in the secondary on a daily basis.

And using that significant breadth of data can actually price them on a daily basis.

What happens to when a unicorn goes public, then what happens with the index?

So our index is designed with invest ability in mind, there is a real goal to eventually create products that a retail investor might be able to use to get exposure to these hard to access unicorns.

And so when a company IPO is, we actually will hold it in the index for 180 days to mimic the kind of lock up period that you would be subject to if you were an institutional grade holder in that private company.

And as you say right now, institutions will potentially have access to the information in this.

Eventually is the plan to this.

I guess everything has become an ETF now, that's right.

We believe in the trend of passive management and our goal eventually is to launch listed products.

It's very important with our partnership with the New York Stock Exchange that we introduce structures to the market that can increase access.

But in a robust, reliable and really trusted way, we don't want to rush something to market um that doesn't meet that really stringent criteria.

And so stage one is, you know, launch this index, make sure the pricing is accurate, trusted, start giving folks the insights, they need to make critical investing decisions and then eventually launch an ETF what's the any timeline there, David?

I would even rough, very rough, I'd say 18 to 24 months.

Um And I also, you know, you talked about the methodology of how you guys are getting the secondary market data.

How do like how did you get them to sort of agree?

Is it because it's through ice and you have this partner?

Because usually there is not a lot of transparency in that kind of data.

Usually there isn't ice is a big, big part of it.

And I have to say their partnership has been fantastic from the gecko.

It has enabled us to go to the sources of secondary information in the market, whether they be brokers, funds themselves, etcetera and say, look, we don't want to be a competitor.

We want to be almost like a non mandatory sip, right?

You give us your data, we will help create something uh in a price that the market can trust.

And that has gotten over a lot of competitive barriers where folks who might be worried that if I tell someone else, my data from my exchange, my cannibalize business to realize, hey, these guys aren't really competing with us on that front, they're really trying to do something formative for the market.

And ultimately, when something like this exists and is trusted, it increases transparency and accessibility for everyone, which only helps those very same sources of information.

And Dave the index is cap weighted.

So you're number one is SpaceX.

That is correct.

Yeah, walk us through some of the other names in that index.

I'm just curious.

So spacex is obviously, you know, the 800 pound gorilla and the index right now, they are about 16%.

Our top five are stripe open A I data bricks and fanatics after spacex.

Um And there's been a big shift actually in the last year toward A I, you know, you had folks just on the show immediately prior that we're talking about public markets today and you know, the kind of reaction to NVIDIA et cetera.

Um We have seen over really the last 12 months, a big shift into investors, really wanting to move into anything that A I is touching.

And so those have been significant performers in the index.

Uh open A I up 30% year over year and actually the index broadly up almost 24% year over year, largely because of A I but SpaceX and I guess transportation, logistics still number one.

And finally, you're a young guy if I can venture to say like, how did you come up with this?

How did this come to be uh a lot of work.

Um you know, initially, we wanted to figure out a way with ice and ultimately nyse to open up asset classes that had traditionally been locked out from retail engagement and nontraditional investors to those folks.

And we thought, how do we do that in a way that they fundamentally understand and kind of harking back to passive management growing more and more important.

We realize index funds and indices that are trusted by the market with robust institutional grade and ultimately regulatory compliant pricing are the steps you gotta get through to really introduce product to that cohort.

And so we really spent the last 2.5 years uh doing just that and we're excited to watch David.

Thanks so much for joining us today.

That was great.

Absolutely.

Appreciate it.