In recent years, a key shift in Europe’s fintech industry has gradually reshaped the traditional capital market pathway. In general, after reaching a certain stage of growth, startups must pursue an IPO or be acquired in order for early investors to sell their shares and realize returns.

The latest private transaction of the German fintech startup Trade Republic provides a representative counterexample. Centered on a mobile app, Trade Republic provides low-cost investment services in equities, ETFs, bonds, and derivatives. Although the company has not yet gone public, it recently completed a large equity transfer through the private secondary market, pushing its overall valuation to approximately EUR 12.5 billion.

Notably, this was not a typical growth capital fundraising round; instead, it was structured primarily as a private share transfer. Early investors and certain employees sold approximately EUR 1.2 billion of existing shares to new and existing investors, including Founders Fund and Sequoia Capital. The company itself did not issue new shares, nor did it raise new capital. In other words, the principal function of the transaction was to provide liquidity to existing shareholders, rather than expanding the company’s capital base. Even so, the deal successfully lifted the company’s valuation to more than twice its 2022 valuation of approximately EUR 5 billion.

This type of private transaction, which does not dilute the capital structure yet enables price revaluation, has propelled Trade Republic to become one of Europe’s most valuable unlisted fintech companies. It also reflects the strong confidence of private markets in mature fintech business models. Observing Trade Republic, alongside numerous other recent international cases, fintech startups are systematically delaying their IPO timelines, increasingly relying on private markets instead as their primary mechanism for mid-to-late stage capital allocation and equity liquidity.

At least three corporate finance factors and structural shifts help explain this trend. The first is extended capital endurance and value accumulation. Abundant private capital allows high-quality fintech startups to secure the funding necessary for growth without rushing to go public, significantly lengthening their lifecycle as private companies. During this period, private capital provides ample resources, enabling firms to capture greater growth value before listing. Well-known fintechs such as Stripe and Revolut completed multiple funding rounds or secondary transactions while still private, achieving valuations that far exceeded those typically seen in traditional IPOs.

Second, the influx of substantial private capital has formed an alternative to public market financing, sparing companies from the ongoing burden of quarterly reporting and stringent regulatory compliance after listing. Remaining private helps companies avoid quarterly earnings pressures from public markets, allowing management teams to focus on long-term strategy and execution, and reducing short-term performance pressure and disclosure costs.

Third is evolution of the private market and the entry of long-term capital. In recent years, the US and EU have adjusted regulations and market mechanisms to strengthen capital market development for private companies. For example, following the JOBS Act, the US raised the shareholder threshold for private companies to 2,000 shareholders, of whom no more than 500 may be non-accredited investors, allowing large unicorns to expand their shareholder base without triggering mandatory public reporting obligations. Dedicated secondary trading platforms such as Nasdaq Private Market and Forge Global have also emerged, enabling qualified investors to trade private equity and enhancing liquidity. At the same time, long-term capital sources such as mutual funds and sovereign wealth funds have increasingly invested in private unicorns.

This diversification of capital sources enables fintech companies to secure sustained support from major institutions even while remaining private. For example, although SpaceX is not publicly listed, internal share transfers have resulted in a valuation as high as USD 400 billion. Payments giant Stripe established a USD 91.5 billion valuation through an internal tender offer in 2023. OpenAI also reached a USD 300 billion valuation during a private fundraising round in 2025. These examples demonstrate that substantial private capital and secondary trading mechanisms allow major fintech players to obtain significant funding and high valuations without relying on IPOs, while continuing to expand their operational footprint.

In contrast, Taiwan’s fintech startups continue to face clear institutional gaps in capital markets, which dampens investor willingness to participate in later-stage rounds, and results in funding discontinuity. The core issue lies in the lack of a predictable liquidity exit for private equity, leaving venture capital funds and entrepreneurs trapped in what could be described as a pre-IPO black hole.

Typically, fintech companies encounter fundraising difficulties after their Series A and B rounds. Without a private secondary market comparable to those in the US and Europe to facilitate equity liquidity, it is difficult to raise the growth capital required for Series C rounds. Early investors are often left to rely on a future IPO or acquisition as their only exit, limiting capital patience. At the same time, insufficient trading platforms and regulatory support constrain transfer of unlisted shares.

Although Taiwan has established the Taiwan Innovation Board (TIB) as a channel for startup listings, it was not until early 2025 that eligibility rules were relaxed to allow general investors to participate in trading. Even after these adjustments, TIB remains part of the public market and maintains listing thresholds that not all fintech startups can meet.

In response to these challenges, Taiwan should reconsider fintech capital exit mechanisms from the perspective of private market institutional design. Four specific policy recommendations could help it achieve this objective.

First, it should establish a regulated private secondary fintech market trading platform. The government and exchange authorities should jointly launch a dedicated platform allowing equity in unlisted fintech companies to be transferred and traded among qualified investors. The platform could initially operate under a financial sandbox framework, with regulators approving participating companies and investor eligibility. With the Nasdaq Private Market as a model, through centralized matching and disclosure mechanisms, it could provide a legitimate and secure channel for equity liquidity, enabling growth-stage fintech companies to offer partial exits to early shareholders without rushing to list. This would enhance private equity liquidity and expand monetization channels for founders, venture capital funds, and employee shareholders.

Second, it should relax investor qualification thresholds. While controlling risk, financial and experience requirements for qualified investors could be moderately eased, or a tiered investor classification system could be introduced, allowing individuals with smaller asset bases but sufficient investment experience to participate in private equity investments. TIB has already lifted its restriction limiting participation to professional investors, broadening the potential investor base. In the future, such relaxation could be extended to specific private market transactions. Lowering investor thresholds would help mobilize more domestic capital and allow a broader range of local investors to share in the growth dividends of financial innovation.

Third, it should guide long-term capital such as life insurance funds, sovereign funds, and the National Development Fund to participate in later-stage growth, particularly Series C rounds. Although Taiwan’s life insurers are legally permitted to invest in equities and private equity markets, risk-based capital requirements, asset-liability management, and accounting valuation and recognition practices have led to a conservative approach toward unlisted growth equity investments in practice. As a result, life insurance has not become a major later-stage funding source.

Drawing on the United Kingdom’s experience of the 2023 Manchester Accord, in which regulators coordinated with life insurers to allocate a fixed annual proportion of funds to domestic innovative industries, the Taiwanese government could consider adjusting regulations governing insurance fund utilization to encourage them to participate in later-stage fintech financing through venture capital funds or industry funds. Such measures would provide patient capital to fintech companies, while potentially improving long-term returns for insurance funds.

Finally, it should strengthen disclosure and risk management mechanisms. The development of a private secondary market must be accompanied by enhanced transparency and investor protection. Fintech companies trading on private platforms should be required to regularly disclose audited financial information, material risks, and significant events for reference by qualified investors. Regulators should also reinforce investor education, emphasizing the liquidity constraints and risk characteristics of such investments. Through sound institutional design, Taiwan can increase liquidity while preserving long-term market confidence, preventing the private market from becoming a breeding ground for speculation.

The Trade Republic case illustrates far beyond providing liquidity exits, that the private secondary market serves as a critical pillar supporting domestic financial innovation. Only through this missing piece of the puzzle can Taiwan’s fintech ecosystem truly shift from a fundraising-driven model to a value-driven model to cultivate the next generation of world-class leaders.

The author is a full-time professor in the Department of Information Management and Finance at National Yang Ming Chiao Tung University and an independent director of Hua Nan Financial Holdings.