Clear Street Aims to Offer Investors Access to Pre-IPO Tech Giants, Starting with Databricks

Clear Street, a prime brokerage startup that recently postponed its own initial public offering (IPO) due to unfavorable market conditions, is now pivoting to provide investors with opportunities to invest in high-profile private technology companies before they become publicly traded. The firm is reportedly on the verge of launching a new platform designed to allow accredited investors to acquire stakes in late-stage private companies. The initial focus of this initiative will be on AI software leader Databricks, a company recently valued at an impressive $188 billion.

Uri Cohen, CEO and co-founder of Clear Street, articulated the company’s objective in an interview, stating, "The goal is to remove friction and give more people the ability to invest in more products." He further elaborated on the increasing wealth creation occurring within private markets and the growing desire among retail and smaller investors to participate in this trend.

The trend of startups remaining private for extended periods is becoming more pronounced, meaning that a significant portion of their value appreciation now happens before they undertake an IPO. This phenomenon has intensified the demand from affluent investors who are eager to gain exposure to companies such as Databricks, Anthropic, and OpenAI prior to their public market debuts. This demand is also being met by established financial institutions; just last week, CNBC reported that Goldman Sachs has established a new platform to enhance its offerings for high-net-worth clients and family offices seeking direct investments in rapidly growing private companies.

While Clear Street’s proposition centers on democratizing access to high-growth technology investments, the operational mechanics of these deals reveal a complex reality within the current private markets. Importantly, Databricks itself is not directly involved in these transactions. Instead of purchasing shares directly issued by Databricks, Clear Street investors will acquire interests in a special purpose vehicle (SPV). This SPV, in turn, holds an interest in a third-party fund that ultimately owns the Databricks shares. From Databricks’ perspective, the official shareholder of record remains this external fund, where the shares are legally held.

This approach has become necessary partly due to past actions by AI startups. Earlier this year, companies like Anthropic took measures to curb unauthorized secondary transfers of their shares, effectively nullifying unapproved SPVs and indirect share sales that circumvented established corporate transfer protocols. In response to potential concerns regarding the validity and security of these indirect investments, Cohen assured that Clear Street, as the counterparty, would assume the associated risks, stating, "If there is a risk, we are taking it."

Databricks, when contacted for comment, issued a statement via email indicating that the startup "does not have any engagement or relationship with Clear Street." This suggests that while Clear Street is facilitating investment access to Databricks shares, the company itself is not directly partnering with or endorsing the initiative.

Bond Sale, 2027 IPO?

Clear Street anticipates having as many as 30 startups represented on its new platform by the end of the year. The majority of these will likely be technology firms with valuations ranging between $5 billion and $20 billion, and which are estimated to be approximately six months to two years away from a potential IPO. To support this strategic expansion, Clear Street is also establishing a dedicated private company equity research division, to be led by analyst Owen Lau. This initiative is described by Cohen as an effort to introduce public-market-style transparency into the traditionally opaque private markets.

This significant push into private markets comes at a crucial juncture for Clear Street itself. The firm, which was last valued at nearly $12 billion in a private funding round earlier this year, made the decision in February to pause its own IPO plans. This decision was influenced by broader market volatility that had a particular impact on the valuations of brokerage and fintech companies. Despite putting its public listing on hold, Clear Street is reportedly cash-flow positive. The company has also strengthened its liquidity position through a $400 million investment-grade bond offering, which provides the necessary financial runway to develop its private market infrastructure.

Cohen expressed confidence in the company’s financial standing, stating, "We’re in a position of strength, so the decision was shelved for better timing." He further indicated a renewed focus on a potential IPO, adding, "We’re definitely going to look towards a ’27 listing, depending on the market conditions." This suggests that while the immediate IPO plans have been deferred, the company remains committed to eventually becoming a publicly traded entity, with 2027 as a target year, contingent on market dynamics. The firm’s current strategy reflects a calculated approach to leverage its financial strength and market position to capitalize on the growing opportunities in the private investment landscape.