The Brazilian company Velvet (formerly known as VELVT) brings a solution for late-stage tech companies to provide liquidity to their early employees, and angel investors. To do this, it has raised $200 million for warehousing investments (discretionary capital) to buy equity from former employees of pre-IPO startups.
It is different from the equity round (which dilutes participation) that the company raised in late 2021, with a Seed of R$17 million, led by the funds’ Headline (ex Redpoint eventures), Yolo Ventures (European fund focused on Blockchain that runs Sportsbet.io) and the global fund for fintechs Armyn Capital, with participation from 16 founders of unicorns from Latin America and Africa.
Some of these founders have invested in the new fundraising, led by Yolo, with participation from family offices. Behind this “velvet rope”, Velvet intends to boost the tech ecosystem, betting that employees “number 1, number 2″, will invest their stock options money by entrepreneurship. With the funding, Velvet intends to invest in 40 companies this year, meaning 20 in Latin America, 10 in India, eight in Southeast Asia, and five in Africa.
“It is a capital that we receive and that at the moment we resell [these stakes] or at the moment the companies grow, we return this capital with an upside for the investors who gave us this investment,” explains Velvet’s co-founder, Edouard de Montmort.
The startup enables access for high-income investors to sell their stakes through a platform, which will launch in the second quarter. It will not be a retail platform, but a marketplace connected with a few large private banking and wealth management firms, which will sell and buy the stakes on behalf of clients.
If before liquidity events for employees came earlier, with PayPal IPOing in four years, for example, today a company can take about 10 years to access the capital markets. “Our idea is to provide liquidity for today’s operators who will be tomorrow’s founders,” Montmort said.
Velvet is the third venture for Montmort, who is still a partner in Árvore, an augmented reality video game studio. The other founder, Carlos Naupari, was CEO of the US-based artificial intelligence company Fligoo.
A piece of the startup
Velvet started making investments last month and has already allocated $35 million by buying stakes from Nuvemshop and Credijusto (a Mexican company with a similar business model to Creditas) in Latin America, and India’s neobank Open. The negotiation of three more investments is “in the final stages”, according to the founder.
The model focuses on mature companies that have gone through large capital rounds, which have received from $500 million to $2 billion, which, for Velvet brings a good return, with a lower risk than investing in an early-stage startup. Velvet is inspired by Carta, Forge, and MoonFare, which also accumulate equity in shares that have no liquidity.
Velvet has not yet set minimum amounts of how much platform investors should buy but said the amount will be low compared to “the multiple millions of dollars” needed to invest in a pre-IPO company. “It will be far from that, for sure,” Montmort said.