Clear Street Aims to Offer Investors Access to Pre-IPO Unicorns, 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 access some of Silicon Valley’s most sought-after private companies before they become publicly traded. The firm is reportedly close to launching a new platform designed to allow accredited investors to acquire stakes in late-stage private companies. The initial focus for this innovative offering is expected to be Databricks, a prominent AI software titan that was recently valued at an impressive $18.8 billion.

Uri Cohen, CEO and co-founder of Clear Street, articulated the company’s strategic vision in an interview, stating, "The goal is to remove friction and give more people the ability to invest in more products. A lot of the wealth creation has been in private markets, and more and more retail investors and smaller investors want to be part of that." This initiative addresses a growing trend where startups are opting to remain private for extended periods. This extended private tenure means that a significant portion of their value appreciation now occurs before they reach the public markets through an IPO. This phenomenon has consequently fueled a rising demand from affluent investors eager to gain exposure to high-growth companies like Databricks, Anthropic, and OpenAI prior to their public market debuts.

This trend of seeking direct stakes in private companies is not isolated to Clear Street. Last week, it was reported that Goldman Sachs has also established a new platform aimed at enhancing its offerings for high-net-worth clients and family offices, who are increasingly expressing a desire for direct ownership in rapidly expanding private enterprises.

However, the mechanics of Clear Street’s proposed deals highlight a nuanced reality within the current private markets. While the firm’s proposition centers on democratizing access to high-growth technology companies, the actual investment structure does not involve direct engagement with the companies themselves. Instead of purchasing shares directly issued by a company like Databricks, Clear Street investors will acquire interests in a special purpose vehicle (SPV). This SPV, in turn, holds a stake in a third-party fund that ultimately owns the shares of the private company. From the perspective of the private company, such as Databricks, the registered shareholder of record remains the external fund, where their shares are legally held.

This indirect investment approach comes against a backdrop of increased scrutiny from private companies. Earlier this year, AI startups like Anthropic took measures to curb unauthorized secondary transfers of their shares. These actions included voiding unapproved SPVs and indirect share sales that were perceived to bypass established corporate transfer rules.

Addressing potential concerns about the integrity of these transactions, Cohen emphasized that Clear Street, as the counterparty, would assume responsibility for the deals. "If there is a risk, we are taking it," he stated.

In response to inquiries, a spokesperson for Databricks clarified that the company "does not have any engagement or relationship with Clear Street."

Looking ahead, Clear Street plans to significantly expand its private company platform, aiming to feature as many as 30 startups by the end of the year. The majority of these companies are expected to be technology firms with valuations ranging from $5 billion to $20 billion, and they are anticipated 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, led by analyst Owen Lau. This initiative is intended to introduce a level of transparency to the typically opaque private markets, mirroring the practices seen in public markets.

This expansion into private markets comes at a pivotal moment for Clear Street itself. The firm, which was last valued at nearly $12 billion in a private funding round earlier this year, had paused its own IPO plans in February. This decision was attributed to broader market volatility that negatively impacted valuations for brokerage and fintech companies.

Despite putting its public listing on hold, Clear Street is reportedly cash-flow positive and has bolstered its liquidity through a $400 million investment-grade bond offering. This financial maneuver provides the company with the necessary 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. We’re definitely going to look towards a ’27 listing, depending on the market conditions." This indicates a potential target for Clear Street’s own IPO in 2027, contingent on favorable market dynamics.