3. Platforms

Throughout this module, we have seen that one of the key challenges in the capital acquisition process from public investors is the generally large information asymmetry between the firm and the investing public and the selection and behavioral problems that this asymmetry can bring about.

Traditionally, firms have hired investment banks to inform the "public" and help them with the marketing, pricing, and placing of its securities in an IPO. However, the IPO-route to public equity is very exclusive, on both the demand and the supply side: Only very few of the companies that need outside capital qualify for an IPO, and only a small fraction of investors who desire exposure to such companies can participate in the traditional underwriting process.  

Therefore, there is room for alternative sources of public financing, and it may well be that these alternative equity markets will flourish in light of the ongoing technological development and the trend towards platform businesses.

In what follows, we briefly discuss some trends and developments in the space of equity financing platforms: