Yahoo Finance

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 insight into where these private companies are valued on a daily basis. And for more we're bringing in the creator of the index, David Shapiro, who'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 NYSE's 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? David, then what happens with the index?

So our index is designed with investability in mind, right? 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 IPOs, we actually will hold it in the index for 180 days to mimic the kind of lock-up period that you'd 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 ETF-ize this? I guess everything is has become an ETF now.

That's right. We, uh, believe in the trend of passive management and our goal eventually is to launch listed products. You know, 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, right? 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? Even rough?

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

Um, and I'm also, you know, you talked about the methodology of how you guys are getting the secondary market data. How did, 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.

Yeah, usually there isn't. Ice is a big, big part of it. And I have to say, you know, their partnership has been fantastic from the gecko. Uh, it has enabled us to go to the sources of secondary information in the market, whether they be brokers, funds themselves, etc. 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 cannibalized 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, that increases transparency and accessibility for everyone, which only helps those very same sources of information.

And, and David, the index is cap weighted. So your number one is SpaceX?

That is correct.

Yeah. Walk us through some of the other names in that index. I'm just curious.

Uh, so SpaceX is obviously, you know, the 800-pound gorilla in the index right now. They are about 16%. Our top five are Stripe, OpenAI, Databricks, and Fanatics after SpaceX. Um, and there's been a big shift actually in the last year toward AI. 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, etc. Um, we have seen over really the last 12 months a big shift into investors really wanting to move into anything that AI is touching. And so those have been significant performers in the index, OpenAI up 30% year-over-year and actually the index broadly up almost 24% year-over-year, largely because of AI. But SpaceX and, I guess, transportation logistics are number one.

Um, 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 the NYSE to open up asset classes that have traditionally been locked out from retail engagement and non-traditional 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 realized index funds and indices that are trusted by the market with robust, institutional grade, and ultimately regulatorily compliant pricing are the steps you got to get through to really introduce product to that cohort. And so we really spent the last two and a half years, uh, doing just that, and we're excited to launch.

Cool. David, thanks so much for joining us today. That was great.

Absolutely. Appreciate it.