Kristal.AI has made a mark in key markets in the Asia Pacific with its wide range of product offerings catering to high net-worth individuals as well as first-time investors looking for a seamless digital wealth management experience. Their curated marketplace of investment products has been hugely popular with their customer base and they are looking to expand their Private Markets offerings to two new verticals — private markets solutions like ESOP liquidity solution and Kristal Managed Funds like Pre-IPO and early-stage fund.
Manmohan Mall, Head of Private Markets & Family Office at Kristal.AI, remarked that investors with a portfolio in the $1-5 million USD range don’t get the same level of access and advisory services in traditional private banks as bigger institutional investors do. “Kristal is able to help our clients make investment portfolio decisions with its unique mix of hybrid human-led advisory capability and machine-led processes and structure,” he added.
In the private markets vertical, Kristal is looking to establish its presence by offering investments in startups with its largest markets, in terms of end investment, in companies based in the US and India. Mall said that the company is very open to opportunities across their client segment of accredited investors.
Kristal Private Markets (KPM)
KPM specialises in providing investment access in high-quality private companies to investors who are looking to diversify their portfolios beyond traditional investment avenues. Their access to pre-IPO companies and high-growth startups enables investment access to privately-owned companies at a much lower minimum investment size. Through its ESOP liquidity service and primary fundraising capability, it now aims to also provide a wide range of solutions to private companies to help them manage their capital requirements.
“Kristal Private Market uses various public and private databases, market studies, and industry sources to derive relevant and required information on the asset. The investment thesis is shared in a consumable manner to aid investor education and enable informed decision-making,” pointed out Mall.
Kristal.AI’s Private Market launched over 15 private market deals last year, facilitating investments in a wide range of private deals in high-growth companies across sectors such as Stock Exchange, EdTech, FinTech, Crypto, FoodTech, Neo-banks, and more. It also provided access to some difficult-to-access companies like SpaceX as well as newly minted Asian unicorns and businesses like Thrasio, Byju’s, Udemy, Dunzo, Synoption, Stockal, and many more.
“The SpaceX name stands out because of Elon Musk’s visibility and it was challenging to get the transaction access for our investors. A lot of people want access and the ability to invest in SpaceX and we were able to get access and execute the investment opportunity so it was a big win for us,” Mall commented.
He added that the complex structure of the deal means they had to gain access through a slightly more complex investment structure and they are currently working to get on to the cap table and give more direct exposure to their investors.
Private markets have seen significant growth in the last decade, explained Mall, and he believes the participation is a lot wider today with more and more individual investors ready to explore these opportunities. The explosive growth over the last 4-5 years has seen Kristal take advantage of the innovation and wealth creation happening in these markets to bring private-sector assets to their investor base.
“We have come across some fantastic deals,” he says, remarking that “We have seen a Grab or a Gojek or a Byju’s having performed and grown.” Last year, there was a handful of unicorns in India but today the market has touched hundreds of unicorns in less than a year,” pointed out Mall. He admits that every asset class would have gone through a bit of correction in the last few months but at Kristal, “we see private deals as a great opportunity for the discerning investor who strongly believes in this asset class.”
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In line with the correction the public market has seen, private markets have also faced this correction and market momentum. To this, Mall had an interesting opinion, “In such a market condition, there are opportunities to come in at a better price point. It is a great opportunity for a discerning investor to come at a more attractive valuation. We as a platform are witnessing more negotiating power in this situation on the price point with the sellers. Hence, overall it looks like this is a buyers’ market now. But now it requires a lot more work to convince investors that this is the best time to diversify into the alternative space of private markets.”
The key aspect driving their growth, believes Mall, is that Kristal’s platform helps democratise these investment products. A typical PE hedge fund deal comes in at a ticket size above $5 million USD. Investors on their platform can get opportunities at smaller ticket sizes depending on the transaction. “Investment in any big or large private company, depending on the deal size, is typically available at a minimum ticket size of $25kUSD. We have even enabled smaller investment sizes like $10k USD,” remarked Mall.
The only constraint is how well their technology can handle the volumes, Mall explained. “We have added our very strong advisory aspect to this because typically, the availability of information is limited on private companies. The team tries to analyse deals by working with founders and investors and make the information available in formats so that investors have an opportunity to understand and dig deep into these companies,” he explained.
He believes their engagement model gives them a very strong differentiation in the private wealth management space. “You do have similar platforms in the US but this level of advisory capability is not there. This kind of asset class is usually looked at by institutions but our Private Markets team does all that research and provides advice,” he continued.
Kristal.AI unveils ESOP liquidity as a solution for private companies; completed $1 million worth of exercise for its own employees
Their investor base includes B2C client segments of mass affluents who qualify under the regulatory definition of Accredited Investors, and the growing B2B2C segment of wealth managers, boutique investment firms, and financial advisors looking to provide their client base in India access to high-quality private market opportunities. This segment represents a large opportunity for Kristal, Mall believes.
In the corporate segment, they are looking to provide liquidity-related solutions for early to late-stage private companies that are the relevant client base for KPM.
Mall pointed out that “Earlier startups took 4 to 5 years to have an exit but now, the time frame has increased to over 10 years. Thus, the ability to provide liquidity increases significantly for companies. Wealth needs a channel to convert it into cash,” added Mall. “Based on preliminary discussions with companies, there is a lot of excitement on the possibilities.”
Kristal.AI has announced an ESOP liquidity programme for their own employees as Kristal’s team believes their company is the perfect candidate to test out their ESOP liquidity programme. It plans to roll out the ESOP Liquidity programme as a service to companies that are looking to provide liquidity options to their employees and early investors.
Mall explained, “A lot of wealth has been created by these companies for their earliest employees and founders including a sizable amount in ESOPs. But this wealth is not liquid to a large extent, so if these people want to buy a house, etc., it becomes difficult to cash out the wealth they have in the form of ESOPs. Hence, there is a need to provide such ESOP liquidity exercises at regular intervals.
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“As the company grows, the ESOP value grows — so if companies can provide liquidity along with that it becomes a very attractive option for these employees. It’s a real dollar value to the wealth creation and we provide a solution working with companies to provide liquidity,” he explained.
The next couple of years will see the company making a lot of efforts to participate in primary fundraising for these subsegments. Refining and marking the ESOP liquidity solutions will be very critical for many companies in startup ecosystems, Mall believes. “Soon people will start questioning cash vs ESOPs; if they can convert it into cash, it will be a major breakthrough for companies to retain people.”
The order placement process for ESOPs exercise is executed on a private blockchain, built and owned by Kristal.AI. The transaction is recorded on the blockchain for credibility and security, the company said. “The ability to execute on a private exchange would make it more credible, and once it scales, will become more valuable. Now, the focus will be on taking it to other companies in key markets like India and Singapore,” Mall remarked.
“Stakeholders in an unlisted company no longer have to wait for the company to go public or for a major investor to come in. With Kristal’s ESOP liquidity service, early phase to late-stage companies would be able to provide easy liquidity solutions to their employees or shareholders without cluttering their cap table,” said Asheesh Chanda, Founder and CEO of Kristal.AI.
The company claims that overall demand for investing in its platform exceeded the total supply of shares within 10 days of launch. The company had announced an ESOP liquidity programme worth over $1 million (Rs 7.5 crore) for former and existing employees. It plans to conduct such exercises every year to facilitate wealth creation opportunities for both the existing and former staff.
Moving to fund-based offerings
Apart from the ESOP liquidity service, they plan to focus on two opportunities to offer in a fund format — a diversified portfolio. Mall said they “are looking to launch couples of funds focused on Seed, Series A level to late/pre-IPO stage companies.”
These are the Pre-IPO Fund (Evolve Fund): A Pre-IPO fund, investing in growth to late/pre-IPO stage. And their Shark Fund focuses on high conviction ideas from Seed to Series A companies with strong fundamentals.
Kristal plans to launch these funds in the next few months. “This would be of interest to a segment of our investors who might not want to take single exposure,” Mall explained. “What really differentiates is the strong advisory role we are able to attach to the offering — you will always be able to find the right investment through us,” he added.
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Mall said they are eager to get started with fund-based offerings since they’ve got some strong anchor demand from investors, and they believe they can fine-tune the funds depending on the opportunities and marketplace.
“Proper digital wealth management on an app is something very unique from an Asian perspective,” believes Mall. Their go-to-market strategy in a market like India is where Kristal teams up with wealth advisors to provide a plug-and-play solution with their technology.
“We are the tech platform that will fit into a private bank or wealth management firm.” That is what gives the real power and potential growth for our startup,” he added. “What we have to offer is quite unique in many ways and that’s why we see a great demand for both models.“
Kristal.AI is currently in discussions about a Series B funding round.
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Photo by Tima Miroshnichenko
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This article is produced by the e27 team, sponsored by Krstal.AI
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