JP Morgan Invests in a Fintech Startup as Institutional Interest for Pre-IPO Businesses Soars

By Luigi Wewege Monday, February 22, 2021

JP Morgan, a major investment company, has reportedly invested in Zanbato, a private fintech startup linked with the data analytics company Palantir, amid high demand for fintech businesses.

JP Morgan skyscraper in Hong Kong.

Fintech Business Exposure Wanted

Zanbato is a fintech startup company co-founded by Joe Lonsdale, who was also one of the co-founders of Palantir in 2010. CNBC reports that JP Morgan is expected to make an announcement later today that it has acquired a stake in Zanbato, a California-based fintech startup.

Zanbato’s platform, known as ZX, was launched in 2016 and now has over 100 member banks and brokers, providing it with a reach in the private stock market.

The company’s user base has more than doubled over the past 12 months, and transaction volumes more than tripled, according to the company’s CEO Nico Sand.

Andrew Tuthill, managing director at JP Morgan, said the startup could be just one of a number of investments that the banking business may make in trading venues and exchanges. Moreover, JP Morgan is looking to expand its access to data and prices in the private company securities market and companies that are expected to go through an initial public offering (IPO).

JP Morgan has seen incredible growth in the new business since it has started trading private firms’ stocks. Some of the private companies in this market include giants like SpaceX, Robinhood, Stripe, and more. Tuthill said that the order flow and demand doubled each month since the bank began trading these stocks in September.

“It’s been a big growth area for the firm,” Tuthill said.

JP Morgan has entered the market as interest in startups preparing for an IPO has substantially increased over the past few years. One of the reasons for this is because venture capital (VC) investors have injected hundreds of billions of dollars into private businesses over the last ten years, allowing those companies to stay private for much longer.

“Companies are staying private for so long that some of these early investors are up 10X-plus on a position. Being able to manage oversized positions, these are things that every manager has done forever, but in private markets, you just never had the liquidity to employ these basic portfolio management techniques,” said Sand.

He added that a high number of startups registered record levels of private stock trading in 2020.

Summary

The US investment banking business JP Morgan is buying a stake in fintech startup company Zanbato as it looks to increase its bets on companies that are expected to conduct an IPO in future.


About the Author

Headshot of Luigi Wewege

Luigi Wewege is the Senior Vice President and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an instructor at the FinTech School which provides online training courses on the latest technology and innovation developments within the financial services industry. Luigi is also the published author of "The Digital Banking Revolution."

Related Articles


Read More