In late 2017 and early 2018, around the same time that the biggest bull run in the history of digital currency came to an end, a much quieter evolution in digital securities started to take place: the tokenization of assets by four VC Funds known collectively as “The First Four.”
Founders and other executives from these four VCs will join us this April 8 at the Ritz Carlton in Los Angeles for the Security Token Summit.
VCs started to tokenize funds surfaced because it allowed processes to operate more efficiently for a number of reasons, most of which have to do with increasing access to capital and streamlining interaction with investors.
How did VC’s Help Build Security Tokens?
Both VC firms and investors realized that digital securities are more secure, have higher liquidity, and allow for features such as easier exit payouts for investors. That is the case with Spice VC, one of the sponsors of CIS and Security Token Summit, who raised $15-million with a security token that is trading on the OpenFinance Network. Spice VC is registered in Singapore, and it is one of the first tokens to be traded on a regulated trading platform in the United States.
(You can listen to our interview with Spice VC’s managing partner, Ami Ben-David, on Episode 2 of our podcast, Security Tokens Uncensored. Spice VC’s other managing partner, Tal Elyashiv, will join us for the above-mentioned panel discussion at the Security Token Summit this April in Los Angeles).
Security Tokens Increased Access to Opportunities Previously Inaccessible for Most
Security tokens became an easy crossover point to transition into for VCs because they provided liquidity and easy access to what was previously an exclusive investment vehicle.
Jamie Finn, President of Securitize, made this point clear:
“It’s simple really, venture capital is illiquid and hard to access, security tokens are liquid and easy to buy, this coupled with an attractive asset class made it interesting to investors. Venture capital is an asset that is usually out of reach of most investors and this coupled with the high returns that can come from this sort of asset made it an ideal crossover asset to the crypto-curious crowd of late 2017/ early 2018.”
Providing a Proof-of-Concept Alongside Access to More Investment Opportunities
The tokenization of VC Funds provided an easy way to demonstrate a Proof-of-Concept while delivering access to more investment opportunities, according to reporter and founder of Crowdfund Insider, Andrew Dix.
“Creating a security token for a venture fund is a great way to show proof of concept while providing access to a diversified portfolio of assets – especially in a sector that is so volatile. Just like single asset tokens, creating a smart asset can make it easier to manage the fund and the investors. It can also enhance the prospect of liquidity. As for what’s missing, I think there is a lot to come as we are still in the early days. It is going to take some time to figure everything out.” said Dix.
Jamie Finn, President of Securitize, also commented on how security tokens offer increased liquidity, easier access to venture capital, and increased access to a global capital pool.
“Liquidity and global capital formation are the primary benefits, but there is a lot more that people don’t consider like transparency. It’s usually very hard to know the NAV of a venture fund, but in a tokenized world it’s easy. Just check the site,” said Finn.
When is a Good Time in the Fundraising Process to Implement Security Tokens?
The benefits of security tokens alone do not provide grounds to integrate digital securities into your company. Instead, security tokens should start to be used once the need for strategic investors goes away after the product has a market fit. Some companies are developing security tokens too early in the fundraising process. However, if security tokens are distributed too early, that can negatively affect fundraising and cause liquidity issues (instead of further enabling liquidity).
Jamie Finn also commented on this. “Security tokens should be used once a company has product market fit and they are scaling the business without the need for strategic investors.”
How will the Industry Change in the Future?
As technology advances, more solutions need to be created specifically for digital securities, as opposed to the current custodial solutions which are mostly made for Crypto and don’t address the market needs for digital securities.
“The current solutions for custody are really CRYPTO specific solutions and don’t address what you need for Digital Securities. I am confident we will see this addressed in the near future by a number of players,” said Finn.
The future looks promising.
The path that VCs started on by tokenizing their funds has dictated market growth and laid the groundwork for a technological evolution in asset management to take place. Between the increased access to capital, the enhanced efficiencies in the investor accountancy pipeline, the ability to deliver a Proof-of-Concept, and increased transparency for the fundraising process, security tokens are transforming the way that companies raise money. This is just the beginning… Receive the latest information about the Security Token industry by listening to our podcast, Security Tokens Uncensored.
PCF Capital to Host $250 milllion DSO through KoreConX
$250 million DSO
One of the largest digital security offerings, to date, has recently been announced. In an upcoming DSO, Australian based, PCF Capital, will be hosting a whopping $250 milllion event, aimed towards the mining and resource sector.
This DSO will be made possible through the use of KoreConX and their digital securities issuance platform. By choosing to use KoreConX, PCF Capital will be gaining access to the KorePartners. This is a network of strategic partnerships which KoreConX has been developing for some time.
This offering will be open to accredited investors in select countires, including the United States, Canada, Australia, and more.
In making their announcement, representatives from each, PCF Capital and KoreConX, took the time to comment on the development discussed here today. The following is what each had to say on the matter.
Liam Twigger, Managing Director at PCF Capital, stated,
“We are a global company that requires a global solution. We selected KoreConX because it will allow us to remain compliant with regulations not only in the USA and Australia but in multiple other jurisdictions around the world…This is a very important step in the history of PCF and we want to make sure our investors are protected and have a platform to be able to manage the entire lifecycle of the digital securities. That’s why we are using the best possible tools for the job.”
Oscar Jofre, CEO at KoreConX, stated,
“We are disruptors and what better way to do that than work with one of the world’s oldest sectors adopting Digital Securities for their offering. PCF Capital’s global reputation in the mining sector made the decision easy for us to bring them on as clients to our platform…Now is the time for the traditional investor to understand the value and trust of digital securities. Having a global offering of this magnitude heavily investing in a Digital Securities Offering is great for the industry as a whole. Many more will follow once the infrastructure is in place for it, and this is what we are doing with the KoreProtocol.”
PCF Capital is an investment banking group, which is headquartered in Australia. Since being founded in 1999, PCF Capital has gone on to manage over $3.5 billion in deals.
Operations are overseen by Managing Director, Liam Twigger.
KoreConX was founded in 2016, and is headquartered out of New York. Above all, KoreConX has been striving to become the most comprehensive platform for private capital markets. This means developing in-house solutions, and partnerships which facilitate needs within the digital securities sector. To date, KoreConX has begun seeing adoption of their platform, as multiple DSOs are scheduled.
Company operations are overseen by CEO, Oscar Jofre.
In Other News
I recent months, KoreConX has found themselves in our headlines on various occasions. Check out the following articles to learn a bit more about what this promising company has been up to.
Blockport STO Fails to Gain Traction – Platform to Shutdown
Failure to Launch
On a disappointing note, Blockport has announced the cancellation of their ongoing security token offering. After launching the event, roughly 1 month ago, the team has indicated that they have failed to attract their minimum threshold of investments.
This comes as a letdown to the industry, as Blockport represented one of the first security token offerings to be offered through the Tokeny platform. To date, only a handful of STOs have taken place through ANY issuance platform.
While Blockport will be returning investments to the few participants in their STO, they have indicated that this is not the end for them. Their intent is to scale back operations in the short term, reflect, and establish a path for future growth.
This means that the platform will be shutting down in the coming weeks, revering to a ‘development mode’.
Blockport CEO, Sebastiaan Lichter, elaborated on the cancellation in a statement to the public. The following is what he had to say on the matter.
“In the past few months our team has worked extremely hard to launch the first round of our STO, and yesterday this ended after being open for almost one month…In short, the results of the fundraise are not sufficient to proceed with the issuance of BPS tokens.”
Despite this, Sebastiaan Lichter remained confident in the future of blockchain. He continued,
“We still see a lot of opportunities in this industry and have built a top performing trading platform that many people love to use and which has had almost zero downtime or issues since we launched it in the summer of 2018…Whilst developing our platform, our goal is to explore opportunities that support a restart of the Blockport platform in the future.”
Operating out of Amsterdam, Blockport is a Dutch company, which was launched in 2017. Under the watch of CEO, Sebastiaan Lichter, Blockport has developed and launched a trading platform, tailored toward, both, utility and security tokens.
The security token offering, discussed here today, was launched through the Tokeny issuance platform, on March 31st, 2019.
Tokeny is a Luxembourg based company, which was launched in 2017. Above all, Tokeny acts as an issuance platform, providing companies with solutions for the tokenization of assets. Tokeny was responsible for facilitating the Blockport STO – For their part, the event went off without a hitch.
In Other News
While the failed STO is an unfortunate situation, BlockPort is by no means alone. For a variety of reasons, there have been various deals to have fallen through in the past few months. The following articles detail a couple of these situations.
BitBond Opens Bounty Program for Live Security Token Offering
BitBond, a blockchain company hosting a FINRA approved STO, has recently announced the launch of a bounty program. This program was launched in an attempt to raise market awareness of their ongoing security token offering.
This STO, scheduled to be live until early June, has seen modest success thus far, with investors contributing over €2 million to date. This puts them well on their way to raising the minimum €3 million in the event.
In an attempt to ensure the minimum €3 million threshold is met in their STO, the bounty program consists of 6 main ways in which participants can be rewarded.
- Hunter Bounty
- Referrals leading to bounty program participation
- Affiliate Bounty
- 5% commission on referrals leading to investments over €10,000
- Signature Bounty
- Token compensation for active BitcoinTalk users which advertise the STO in their signature.
- Creative Bounty
- Rewards for creative advertising in the form of memes, gifs, images, etc.
- Social Media Bounty
- Compensation for STO promotion through qualified Twitter, Facebook, LinkedIn, and Telegram accounts
- Content Bounty
- Rewards for creation of articles, and videos, which raise awareness about the BitBond STO.
A bounty program is a promotional event, aimed towards raising awareness of a fundraiser. Participants in such programs are typically compensated for promoting a company with tokens. Promotional tasks are often varied, such as writing articles, attaining referrals, reporting bugs, and so on.
While bounty programs were commonplace throughout the ICO boom, the concept is new when being applied to security token offerings. Time will tell if this promotional tool is an effective one when dealing with this new form of fund raising.
BitBond CEO, Radoslav Albrecht, commented to CrytoGlobe on the choice to host a bounty program. He stated the following.
“Since our launch in 2013 Bitbond has always worked closely with the crypto and blockchain community. This bounty program gives us the opportunity to engage further with our community, reward Bitbond early adopters and spread the news about our new groundbreaking project, the Bitbond STO.”
BitBond is a Germany based company, which was launched in 2013. Above all, BitBond utilized blockchain to facilitate financial services. This primarily includes the issuance of business loans.
Company operations are overseen by Founder and CEO, Radoslav Albrecht.
We recently detailed BitBond and their FINRA approval – a feat not achieved by scores of applicants prior to BitBond. Check out the details to this success HERE.
In Other News
Beyond BitBond utilizing the Stellar blockchain for issuing security tokens, Stellar has experienced growing levels of adoption in recent months. The following articles demonstrate various ways in which this adoption has occurred.
- PCF Capital to Host $250 milllion DSO through KoreConX May 19, 2019
- Blockport STO Fails to Gain Traction – Platform to Shutdown May 18, 2019
- BitBond Opens Bounty Program for Live Security Token Offering May 18, 2019
- Poloniex Cleans House as Tokens Delisted for Fear of Being Called Securities May 18, 2019
- Blockstream to Add Support for Digital Securities on Liquid Security Platform May 17, 2019