Capital Markets: Stock Exchanges vs. Crowdfunding & Co.

Capital Markets: Stock Exchanges vs. Crowdfunding & Co.

Valeria Ceccarelli, Head Primary Markets, SIX, and Lukas Weber, the co-CEO and co-founder of, talk about the future of capital markets, the benefits of communities, and the limitations of crowds.

We’re holding this conversation in the Swiss Finance Museum in Zurich. Will stock exchanges soon be relegated to historical artifacts by new ways of raising capital such as equity crowdfunding?

Valeria Ceccarelli Stock exchanges are far from obsolete. They perform a prime function for an economy by connecting providers and users of capital. But they’re more than just capital markets where companies raise external funding. Their uniqueness lies in the fact that they’re also efficient trading venues where securities can be bought and sold at any time. Every stock exchange has rules and regulations based on the principles of fairness and transparency that protect investors and listed companies alike. In addition, stock exchanges supply the financial community with high-quality financial information.

Lukas Weber First of all, we at shun the term "crowdfunding." It suggests that anyone with a handful of francs can invest in a company. But that’s certainly not the case on our platform. We seek quality, not just among the companies we present to investors, but also among the investors themselves, who we view not just as bankrollers, but also as a pool of know-how. They make entrepreneurial investments to the tune of CHF 10,000 and upward. We have amassed a community of approximately 12,000 people. Most of them aren’t full-time investors, but rather well-networked entrepreneurs, current or former CEOs, etc. Our community’s expertise is an immensely important asset that we contribute as investors. After all, we are competing primarily against traditional venture capitalists, not against stock exchanges, which don’t belong in a display case, in my opinion.

Ceccarelli We cultivate a community as well. Once companies have gone public we provide network opportunities. We offer education and trainings in conjunctions with experts, for instance best practice workshops for investor relation professionals or talks on relevant topics.

Let’s take a step back. Where will companies raise capital in the future?

Ceccarelli As already mentioned in my first answer, I believe that stock exchanges will remain one of the primary venues where companies raise capital even though there are other ways to do that and new ones might develop in the future.

Isn’t it true that fewer and fewer companies are going public?

Ceccarelli The six listings on the Swiss Exchange in 2017 exceed the yearly average seen recently. Looking at a longer time frame it is true that globally the number of IPOs in more developed countries has been decreasing. Compared to 20 years ago more private equity capital is available. The private equity sector and its alternative sources of capital today give companies increased flexibility in how to finance growth or innovation during certain stages of their life cycle.

Weber I agree with you, there’s a greater availability of off-market funding. But in the private equity space, only a small, elite circle of investment funds are capable of providing companies with very large amounts of capital. In this very interesting market, we want to give a larger sphere of investors access to companies before they go public.

Stock exchanges will remain one of the primary venues where companies raise capital.

Valeria Ceccarelli

Ceccarelli Let’s not forget though that private equity funds play a major role themselves in IPOs, which create an exit option for them. Half of the entire European IPO volume from 2014 through 2016 was backed by private equity. The 2016 IPO of VAT and the 2015 IPO of Sunrise on the Swiss Exchange are two examples.

Weber However, smaller companies, and especially companies in the start-up or development stage that are not yet ready to go public, need alternative sources of funding. We at, for instance, enable select privately held companies to efficiently access capital and a network of investors via our platform.

So, is the choice of means primarily determined by the amount of capital needed?

Ceccarelli Yes and no, because raising capital is only one of the reasons why companies go public. An initial public offering is much more than just a one-time opportunity to raise capital. A company that is already listed on a stock exchange can easily raise additional capital. A listed company’s stock also gives companies a liquid currency that can be used to fund inorganic expansion. Listed companies are able to attract leading talent, for example by offering employee share plans. Another reason for going public is publicity. A stock exchange listing can strengthen a brand, and makea company appear more open and credible in the eyes of customers and suppliers. That can help a company to stand out from competitors or to enter new markets.

Weber We obviously can’t keep pace with a stock exchange where publicity is concerned. Nevertheless, we do influence the visibility of start-up companies when we add them to our portfolio. There are important trust factors in the search for venture capital: Who has already invested? Who is investing in the current financing round? The credibility of the investment increases with each new investor. After seven years in operation, we’ve built a good reputation with We have strict rules that determine who we want to join forces with. We examine more than 1,000 companies each year, but present only 15 to 20 of them to our community. A commitment from us builds confidence and may attract other investors.

Ceccarelli We also are committed to enhance the visibility of small and midsized companies – and thus potentially enhance their trading liquidity on the market – through special programs like Stage.

Which brings us to liquidity.

Weber Venture capital is very illiquid. Our investors want to shepherd a company over a lengthy period. In contrast to classical investment funds that are captive to their cycles, we remain flexible. It’s not about flipping shares that have just been acquired. From a company’s perspective, the possibility of trading shares would actually cause considerable uncertainty. How can additional financial backers be enticed on board if some shareholders are already selling their stakes, perhaps even at sharply reduced prices? That would also harm the aforementioned reputation of our community.

Ceccarelli Stock exchanges, of course, have always allowed securities to be bought and sold, also after the initial raising of capital. And they are open to everybody, regardless of one’s budget. There’s a touch of irony in the fact that stock exchanges remain the measure of all things in the democratization of stock ownership.

A commitment from us builds confidence and may attract other investors.

Lukas Weber

Weber That’s true. We at, though, are not striving for a complete democratization, but we are, for instance, thinking about reducing the current minimum investment amount of CHF 10,000 by half, albeit primarily also to enable our investors to better diversify their holdings. The bottom line is that we address different investors than stock exchanges do.

Ceccarelli Just like your platform looks for companies with a different profile and at a different stage of their life cycle. That makes Swiss Exchange by SIX and interesting for companies at other points in time. So, in that sense, I’m looking forward to the first occasion when a company that once raised capital via your platform debuts on the Swiss exchange.

Stage Program

One of the prime reasons for listing a company on a stock exchange is to raise capital. But in order to continue growing after going public, shares of exchange-listed companies need to have at least a minimum of trading liquidity. Shares of small or midsized companies often lack trading liquidity for a number of different reasons such as insufficient visibility in the market.

With its Stage Program, SIX helps companies to increase their visibility and thus attain an appropriate valuation. The Stage Program includes regularly updated fact sheets from Morningstar and research reports from banks, which both boost the flow of information to potential investors. Education, workshops and networking events are also part of the program.

Stage has been up and running for a good year now and has seven listed companies on board, so far. Andrea von Bartenwerffer, Head Issuer Relations, SIX in charge of the program, comments: "The numbers so far correspond to our expectations. But far more important is the fact that the program’s provisions are already exerting notable impacts here and there."

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