A new startup called eShares was formed to help private companies, as well as investors and employees, move beyond paper records for their shares and options.
Unlike public markets, where investors and employees have been issued and have traded electronic shares for years, private companies are still stuck in an archaic world of paper stock certificates.
eShares wants to change that by creating a centralized hub where companies keep electronic records of all shares and options for themselves, as well as employees and investors.
Once that’s done, anyone with shares or options will get a notice saying that their paper certificates have been replaced with electronic shares, which they can see in their eShares portfolio.
Altogether, it’s not all that different from what happens when a company has an IPO – all shareholders receive a blanket notice that their paper certificates have been transferred to electronic shares which can be bought or sold on oneof the major public markets.
For the companies themselves, eShares will make issuing and managing shares free, but it’s looking at ways to monetize by charging a nominal fee when companies issue options or managing the cap table when options are redeemed by employees.
Doing so would enable easier secondary sales of shares in private companies which could lead more companies to hold off on going public, as employees and investors would have a little more liquidity.