iCapital is a financial technology company with the mission to power the world’s alternative investment marketplace. Our platform has transformed the way alternative investments are bought and sold through tech-based solutions for advisors, their high-net-worth client base, asset managers, and banks.
The company Connects more than 10,000 financial advisors and their hundreds of thousands of high-net-worth clients to private equity, private debt, venture capital, real estate and hedge funds with as little as $25,000 invested per fund—much lower than traditional minimums for these funds, that can run from $1 million up to $10 million. Now providing its “white label” service to more than 140 firms, including Blackstone, The Carlyle Group, Brookfield, UBS, Deutsche Bank and Goldman Sachs.
Brooke Southall wrote about the company in RIABiz stating iCapital announced it has raised a staggering $440 million with only minor dilution. The equity sale is based on a valuation of about $4 billion, amounting to roughly a 10% minority stake that almost triples its lifetime VC backing.
The New York City agglomeration of alternative investment assets adds this raise to the $162 million round it executed in March 2020. iCapital had only raised $79 million in its preceding seven years.
That $162-million round — originally called a $146-million round — helped pay for five acquisitions and set the stage to grow administered assets to more than $80 billion, up 74% from $46 billion at the time.
This round is intended to accomplish what an initial public offering (IPO) might do — set up a capital reserve that makes it easy for iCapital CEO Lawrence Calcano to move reflexively — but without all the red tape and distraction of a public company.
“The one scarce resource is time,” he says, explaining why he turned away IPO underwriting offers. “I want us to spend all of our time growing the business.”
Previously, Calcano had to make a hard decision about an option BlackRock bought years ago that gave the $7-trillion manager the right to acquire 100% of iCapital in the future, according to The Wall Street Journal.
Knowing it would likely need a broader base of support, BlackRock and iCapital executives negotiated voiding that option. In exchange, BlackRock was able to increase its equity stake, the Journal reports today.
With so many powerhouses to please and so little time, Calcano has been racing to build iCapital with one acquisition, software conversion and internal startup after another since he last spoke with RIABiz in March of 2020.
The 2013-founded startup — which has now been positive cash flow for two years — grew from $46 billion to $80 billion of assets in the past year and the growth was of the best kind — organic, recurring and building.
“We have a very high growth rate and it’s all been organic,” Calcano says of growth over the last 12 months.
A chunk of the growth in the past year tracks to the May 2020 purchases of Artivest, which managed about $4 billion, and Wells Fargo’s alternative investment platform, which administered $3 billion in client assets. See: No sooner does Lawrence Calcano raise $146 million than he buys rival Artivest — then Wells Fargo alts service — capping iCapital’s 500%-plus run on alternatives ‘platform’ to $58 billion — with almost every wolf on Wall Street chipping in
iCapital has since integrated Artivest into its own platform making sure to preserve its best features — part of a bigger effort to automate across the whole process of compliance, research, investing, constructing portfolios and operating alternative investments.
The effort is bearing fruit. iCapital announced July 13 it is becoming the backbone of Envestnet’s launch of an alts platform for its 105,000 financial advisors.
“iCapital’s demonstrated technology, and both firms’ extensive history with alternatives will be key for helping us equip advisors with the tools to help diversify client portfolios, said Envestnet CEO Bill Crager in a release.
iCapital has made Addepar CEO Eric Poirier into a believer, as well. See: Nearing $3 trillion of AUA, Addepar accepts another $150 million of unsolicited PE money because the price was right –a $2.17 billion valuation
“iCapital has been a partner of Addepar for years and they have built a truly differentiated business,” he says by email from an offsite retreat.
“Together, we see an opportunity to continue scaling and growing, especially as our mutual clients’ appetite for access to alternatives continues to increase.”
On June 10, it announced signing a deal with Euro-power Allfunds to become the alts feeder for its 1,500 bank clients. The Zurich firm administers $1.3 trillion of assets.
Also on iCapital’s near-term to-do list is the rollout of a means to invest in cryptocurrency, the company says.
What has big-name investors profess about coughing up big-time capital is the dream of digitally “Robinhood-izing” — and dominating the inventory and flow — of the still analog, spreadsheet-based world of private investments.
“The WestCap team is excited to scale our equity position in iCapital, the dominant digital alternative investment distribution platform,” said Laurence Tosi, founder and managing partner of WestCap and former CFO of Blackstone and Airbnb, which re-upped its own equity position in the round.
Gregg Lemkau, chief executive officer of MSD Partners, L.P., another existing and continuing investor was encouraged similarly to back iCapital.
“The market opportunity to open up access and digitize alternative investing in this space is substantial, and we believe iCapital is extremely well positioned to capture it.”
Yet the round was led by Temasek, a relatively unknown Singapore manager of an estimated $380 billion sovereign wealth fund headed by CEO Ho Ching, wife of Lee Hsien Loong, the third Prime Minister of Singapore since 2004.
The March 2020 round was led by Hong Kong-based Ping An Global Voyager Fund.
Other new investors in the July 2021 round include Owl Rock, a division of Blue Owl Capital; MSD Partners, L.P.; Noah Holdings and Golub Capital. Three months later, Citi got added to the roster in late October. It declined to disclose the amount and its ipso facto investment did not increase the $440 million total previously published.
Additional funding will come from existing investors WestCap, Ping An Voyager Partners, Blackstone, UBS, Pivot Investment Partners, BNY Mellon, Wells Fargo, Morgan Stanley and Goldman Sachs Asset Management.
The bet by iCapital’s owners is that by dominating online access to the industry — or even just getting a bigger sliver — will make the company explode and shower the all-star roster of investors with significant returns.