12 Dec 2019
Scaling up with Anand Sambasivan of PrimaryBid
Democratising capital markets. That's the ambitious vision of fintech firm PrimaryBid, which has already spent the last few years successfully levelling the playing field for retail investors during public equity issuances.
CEO Anand Sambasivan is confident this is just the beginning. He spoke to us about PrimaryBid's journey so far, the challenges retail investors face and his plans for the future.
Anand, tell us a little about your background
I have a fairly international background. I was born in Mumbai, grew up in Singapore and went to college in the US. I studied economics before starting my career on Wall Street as an investment banker. I performed a similar role for Credit Suisse here in London, but then I left all that behind and moved to the buy-side. There, I started a hedge fund, which I ran for about 8 years.
Retail inclusion in capital market offerings was something I was obsessed about from the very start of my career – primarily because I wanted in! I finally got around to it with PrimaryBid.
What is PrimaryBid, and how does it work?
The reason PrimaryBid exists is because there is a very visible imbalance in the public markets. Public equity, by its very name, suggests broad retail ownership and that's actually accurate. If you look at the US, for example, 37% of US public equities are directly held by retail investors in single stocks. That means everyday investors own these stocks via their brokerage accounts.
What's incredible is that publicly listed companies cannot access retail investors directly when they try to raise money. They've never been able to do so. Whenever publicly listed companies try to raise money, they do so at discounts to the market price. As a result, they only get to go to deeper-pocketed institutions, so retail investors don't get the best deals.
"Surround yourself with the right people. That's your team and your investors because it's never a one-person show, it's always a group effort.
PrimaryBid slots into the public equity issuance process by having a digital platform that very quickly aggregates, automates and centralises the retail demand and plugging it right back into the investment bank in real-time.
We're giving retail investors an opportunity to take part in public market fund raises.
Why are retail investors closed out of these markets?
It's nothing Machiavellian. The system just hasn't evolved in decades. Historically, when companies needed to raise money, they went to their bankers, who then went to their clients, which were major institutions, and secured the investment.
It was a very smooth process, and that's how it's always worked in the past and continues to work today. The banks were extremely good at what they do and are fundamentally wholesalers. This created a wholesale process for generating capital for the companies, but retail investors aren't able to take part this wholesale process because deals are extremely time-sensitive. They happen in off-market hours for a few hours or a day.
Retail investors are also hugely fragmented; they exist in significant numbers all across the world. There is a huge administrative burden that occurs when taking orders, and banks are just ill-equipped for this task.
What are the biggest lessons you've learned since becoming an entrepreneur?
That's a tough one! I'd pick two things that are very important for me.
1) Surround yourself with the right people. That's your team and your investors because it's never a one-person show, it's always a group effort. You need people around you who understand your vision and the company that you're building, who want to be involved and can help you along that journey.
2) An unwavering level of belief in your mission. As a start-up, the journey is very volatile. You get very high highs and very low lows. A relentless conviction in the company and its purpose, at least for me, really helped smooth out that volatility and cut through the noise, particularly during the early stages.
Looking back, is there anything you would have done differently?
Right now, I'm probably the most excited I've ever been with PrimaryBid.
Our team is outstanding. The people we have working for us; they are so enthusiastic, it's amazing. I learn so much from them. Our partners are best-in-class, including longstanding partnerships with London Stock Exchange and Euronext.
You have circa $5 trillion of bonds issued every year, none of which go to retail investors directly. That's a space we find very interesting.
Our shareholders and new investors incredibly supportive of our vision, including Investec’s Outward VC fund. We're well funded to execute our game plan, so we're in a very exciting place.
To get here, we did a lot of things right and we did a lot of things wrong. Frankly, each one of those decisions was a pathway to get to where we are today.
I guess that's all a long-winded way of saying I wouldn't want to change the mistakes I've made, because it's landed us where we are today.
Tell us more about your recent expansion into Europe
We are very lucky to have a long-term partnership with EuroNext, which is the pan-European stock exchange. We're now going to be the retail gateway for publicly listed companies who are raising capital in the market. This applies across nine different geographies in continental Europe.
The next time a company needs to raise capital, it won't just go to institutions. If it's a French company, it'll move beyond French investors and go to a Pan-European set of retail investors all at the same time and the same price. We want to create a Pan-European retail gateway for public equity issuances.
What are your plans for the future?
We recently announced a long term collaboration with London Stock Exchange. This is a very exciting partnership as it accelerates the roll out of our platform across the UK and across all major publicly listed companies.
There are other clear geographical markets that are extremely attractive to us. The US is obviously one. Australia, Canada and South Africa too. We're really excited about the different geographies we'd like to enter.
We're also excited about products; it's not just equities that we want to democratise, but also fixed-income assets. That's a massive market. You have circa $5 trillion of bonds issued every year, none of which go to retail investors directly. Indeed, our agreement with the stock exchanges over debt and equity.
Disclaimer: Investec is an investor in PrimaryBid through the Outward VC fund.