A View From The Top: Kaidi Ruusalepp, founder of Funderbeam, on building a stock market for startups

Kaidi Ruusalepp, founder of Funderbeam and former chief executive of the Tallinn Stock Exchange, was just 20 years old when she was plucked from the second year of her law degree and recruited by the Estonian government to write the country’s digital signatures regulation.

The regulation would go on to underpin all the technological developments that would cement Estonia’s reputation for one of the most digitally advanced economies in Europe, including the digital identity necessary for e-Residency, which allows non-residents to become digital citizens.

It was 1996, just five years after Estonia had gained independence from the Soviet Republic, and the country was in flux. Ruusalepp was part of a generation that had access to computers and the internet for the first time. She spent her days scouring foreign laws relating to digital signatures and cherry-picking the best parts for Estonia.

“I knew basically nothing about the technology, but because Estonia just gained independence, we were in a state where we had to build up the country and all available resources were in the use,” Ruusalepp remembers. “You can imagine if you give freedom to these kind of crazy youngsters and they could put the whole state online – which happened – I was just happy to be a part of it.”

The experience gave her a love of innovation, even in unchartered territories: “That’s something you get for your whole life.”

Ruuselepp spent five years working for the Estonian government afterwards. “Those were wonderful years,” she says. “It opened up the whole new world for me in terms of having colleagues who were not afraid to make things happen and launch new things.”

The Tallinn Stock Exchange, which she joined just as it was preparing to merge with the Helsinki Stock Exchange in 2001, proved another opportunity for entrepreneurialism. “Back then we were just crazy young people working for the stock exchange, growing it, launching new products, launching new everything,” she says, blue eyes sparkling across the table backstage at TechCrunch Disrupt Berlin, where she is on a panel. “I remember working day and night and going out to all the parties.”

By 2013, Ruusalepp had stepped back from her position as chief executive of the Tallinn Stock Exchange, which became part of NASDAQ in a 2008 merger, to join the board. She took maternity leave – a generous 18 months – and realised that she had travelled very far from her passion for innovation and entrepreneurship.

She had been at the Tallinn Stock Exchange for 12 years and had seen it grow from an agile, independent business to a small part of NASDAQ’s machine. She was comfortable in a way that might ordinarily appeal to someone with a very young family – but not Ruusalepp.

“There are different stages in a company,” she says. “One is the building and scaling and one is sustaining or keeping. I’m not the keeping person. I get bored.”

At home and walking the streets of Tallinn with her newborn, Ruusalepp decided she had three options: go back to the corporation, move out of the country to do something different and more challenging, or to go it alone. Tempted by the third option, she began to think about market opportunities in the finance sector. It didn’t take long to land upon education.

“I know how much effort we put into the investor education,” Ruusalepp says of her time at the stock exchange, “and how many lawsuits we had because people didn’t understand what price to go with. The stock exchange always gets the blame!”

Ruusalepp had an idea to build a game to teach young people how to use the stock market. She could build it for teenagers to trade with assets they would find exciting, like startups. Within weeks, Ruusalepp realised that she was building more than a game. Funderbeam has evolved into a platform for investors to fund and trade startups, or high-growth private companies, with enough liquidity, or activity from buyers and sellers, so that traders could get in and out of the market when they want.

People have attempted to build stock exchanges for startups before. The Alternative Investment Market, or AIM, was launched as a sub-market of the London Stock Exchange in 1995 for smaller companies that want to list shares publicly. Other private markets exist for investors interested in crowdfunding startups, like Seedrs, but do not include the option to trade their share.

Ruusalepp says the lack of liquidity has prevented these platforms from taking off. “I’ve seen the transformation of stock exchanges, turning from growth capital into exit engines. That has been the philosophical and fundamental change over the last maybe 15 years,” she says.

Funderbeam is built to make it easier for investors to support early-stage startups. Ruusalepp and her team set out to remove the risk that investors might find their money stuck for a decade until the company grows big enough to list publicly. It looks like a regular crowdfunding platform, where companies can make their case for investment.

But, unlike Seedrs and other crowdfunding platforms, Funderbeam investments are tradeable at any time. One major technological advance has made this possible: blockchain.

“The blockchain solves one thing in the industry and that is trust,” Ruusalepp says. She explains how stock markets originated in coffee shops, where traders met in person. In the centuries since, intermediaries such as brokers and exchanges have been introduced to provide security, standing between the seller and the buyer of the shares. Blockchain, Ruusalepp says, connects the buyer and the seller again, just digitally: “It is like a new virtual coffee shop.”

Around 30 companies are now tradeable on Funderbeam, including the Estonian car-sharing platform Autolevi Syndicate, which raised 130 per cent of its minimum target within 24 hours of listing in November. Funderbeam hit 2000 trades in May 2018 and by August had raised €8m (£7.1m) through the platform, from 5,000 investors.

Funderbeam has applied for its global trading licence in Singapore. “Europe, unfortunately, has built existing business models into the laws,” she explains. “Singapore has the licence to run a private exchange of private companies on the blockchain without all those intermediaries, allowing us to use the full power of this technology.”

At the end of last summer, Ruusalepp moved to Singapore with her two children and her husband. Despite finding it hard to imagine a life outside her beloved Estonia, Ruusalepp was convinced by her family to make the move and the family are doing well. “My eight-year-old has said he doesn’t want to go home,” she says. “It’s like Switzerland but with palm trees!”

Ruusalepp will stay at the helm just as long as Funderbeam is growing. She says it will be at least two years until Funderbeam needs “a keeping person” and then she wants to stay and work with entrepreneurs.

“I hope that I could give new entrepreneurs the experience that I had,” she says. “Entrepreneurship gives you the freedom to go after your dreams.”