Getting into a startup takes seconds. Getting out can take a decade

Equity crowdfunding made a simple promise: ordinary people could back a young company early, alongside the founders, and share in what it became. Monzo is the poster child. One early round filled in 96 seconds. In December 2018 the bank raised about £20m from roughly 36,000 people. Buying in was effortless, a few taps in an app.

Getting out is the part nobody designed for.

Most crowd investors do not sit directly on a company's share register. They invest through a nominee, where a single nominee company is the legal shareholder and the crowd hold the beneficial interest behind it. It is an elegant way to raise from thousands of people and administer them as one line on the cap table. It was never built to let those thousands leave.

You can see the gap clearly in what has happened since. In October 2024 Monzo ran a secondary share sale at a valuation of around 5.9 billion dollars, letting employees and earlier institutional investors sell some of their holdings. That is liquidity, organised by the company, priced, with buyers lined up. The crowd who took the earliest risk were, for the most part, not in that room.

Routes do exist for retail holders. Crowdcube runs a secondary marketplace, and has been expanding it. But it is a side door, not the front one. You can list your shares, yet you only sell if a buyer happens to appear for that specific company, at a price you accept, and often only if the company permits secondary trading at all. Many holders do not even know the option is there. Compare that with the insiders' organised exit and the asymmetry is obvious. One group is handed the door. The other is handed a noticeboard.

What about an IPO? Monzo has appointed advisers and is reportedly preparing a London listing targeting a £6bn to £7bn valuation. But there is no date, no prospectus and no price range, the timeline could slip, and the chief executive who favoured an earlier listing has departed. For a crowd investor, that means the only real exit on offer is a single, distant, binary event they do not control, on the company's timetable. Even a winning bet locks you in. You can be completely right about the company and still wait the better part of a decade to see a penny of it, if you see it at all.

This is exactly where tokenisation will change the deal, and not just for one side.

If the beneficial interest a crowd investor holds is represented by a token rather than an entry in a platform's books, it can move. Pair that with a regulated, windowed venue such as PISCES and liquidity stops being a one-off lottery at IPO and becomes periodic and rules-based. An investor can back a startup from the outset knowing there is a structured secondary option ahead, not the always-on trading that rightly worries regulators, but a real, scheduled door.

That benefits everyone in the chain. Founders raise more easily when backers are not signing up to indefinite lock-in. Investors get a realistic path to realise value along the way, or to exit early if life demands it, rather than waiting on a single far-off event. And it sits comfortably with the tax regime: our understanding is that SEIS and EIS relief attaches to the share and depends on holding for the qualifying period, so a windowed secondary that opens at or beyond that point lets relief and liquidity coexist rather than compete. The option helps the SEIS investor and the non-SEIS investor alike.

The lesson from Monzo is not that crowdfunding failed. It plainly worked, for the company and for many customers who were invited to back it. The missing piece was always the way out. Tokenisation, paired with a regulated venue and the structures James Burnie set out in this month's Legal View, is how that piece finally arrives, for founders and investors at the same time.

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*TokenisingStartups is the UK's knowledge and discovery platform for equity tokenisation. We write about the plumbing of private markets so founders and investors can see it clearly. Nothing here is advice.*