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Tal Elyashiv is the Co-Founder & Managing Partner of SPiCE VC, one of the first tokenized venture capital funds. Tal is also CIO at Capital One, CIO at Bank of America; COO at BondDesk; CTO & Head of New Businesses at 888; & a Co-Founder of Securitize.
In this interview Tal discusses both the original SPiCE VC fund as well as the upcoming launch of the highly anticipated SPiCE II fund.
The original SPiCE VC fund launched in mid-2018, what were some of the most successful exits from this fund?
We have seen three portfolio companies go public: INX Limited, Lottery.com and Bakkt. That is in addition to stellar performance of some other portfolio companies like Blockdaemon, Securitize and Ripio.
Were there any companies in the fund that exceeded your expectations?
Blockdaemon and Securitize top the list here.
Blockdaemon managed to conquer and dominate their market segment so rapidly – which in return translated to a quick series of investment rounds (A, B, and C) within a year.
Securitize, building significant value by broadening its reach and expanding strategically to complete a wide set of complementary services in the tokenization space. This includes (but is not limited to) becoming a Transfer Agent, a Broker Dealer, and launching Securitize Markets digital securities marketplace, as well as becoming a significant player in the Japanese market through the acquisition of BUIDL.
Another company that exceeded expectations is INX. They managed to pull both the first ever digital security-based IPO with a major raise of funds, as well as going public on the Canadian Neo stock exchange.
Just to be clear – I had high expectations for all three, but they still managed to exceed these expectations.
The initial fund focused on companies in the either pre-series-A or pre-ICO stage, how will this investment philosophy change with the SPiCE II fund?
SPiCE II will keep a similar early stage focus of post-seed, pre series A. However, In SPiCE I, we made some exceptions when it made sense. For example, we invested in BlockDaemon ‘s seed round. We also invested in Ripio’s A round. I expect us to do the same in SPiCE II.
Given the larger size of SPiCE II Vs. SPiCE I, a couple of things will change:
First, we expect to make much larger first investment in portfolio companies, and lead/co-lead most of those investments. This will allow us much greater impact and participation with our portfolio companies.
The second is that we will make some later stage investments to create more balance and growth timing distribution within the portfolio.
What type of companies are you personally most bullish on?
This is really a tough question. DLT/Blockchain adoption is so much broader and deeper than 4 years ago when we launched SPiCE I and as a result there are so many more industries and business domains to invest in. This has created more opportunities to impact and help drive some of the amazing growth of the ecosystem.
We feel that this is a great time deploy a larger fund and participate in the exponential growth journey of future industry leaders. I almost feel like a kid in a candy store!
Of course, success in the VC world is to a large degree about choosing. SPiCE has an investment strategy we follow, and a disciplined process for choosing companies based on many parameters contributing to potential future success.
At a very broad level, I would say that I am excited about the implementation and adoption of Blockchain and tokenization in all financial verticals, including capital markets, banking, payments, and insurance. I am excited about the many possibilities Blockchain and the NFT paradigm offers to industries like supply chain management, luxury goods, and healthcare for example. I am also excited about the possibilities the Metaverse opens for retail, branding, arts and performing arts.
Of course, I am also excited about the possibilities in the tokenization space and also the continued growth and maturation yet to come in the digital securities space.
But as I said, at the end of the day, it all boils down to making choices that in retrospect prove to be good choices and as a result creating significant value to investors while driving and enabling ecosystem growth.
What are the biggest benefits for investors of participating in a tokenized VC fund?
The main benefits are the potential for liquidity, the ability of tokenized funds to reduce the barriers of minimum investment size, and allowing more investors to be exposed to this asset class.
Liquidity (or the lack thereof) is a major issue for investors in the VC space and has a significant impact on participation. It is true that liquidity is still in its early days as it related to digital securities. However, we did see significant improvement in liquidity and trading volumes over the last year, and I expect this trend to continue.
In terms of minimum investment size and number of investors – SPiCE I is a great example of that. As the first fully tokenized VC fund it has several hundred investors, 10-20 times a typical VC fund. This is enabled by the tokenization and digitalization of many of the fund operational processes (in our case, curtesy of Securitize technology and services).
What type of growth do you personally foresee in security tokens in the foreseeable future?
I believe we will see more use of Reg A+ (aka “Mini IPO”) which allows for fundraising of up to $75m from retail.
I expect the size of security token issuances to grow over the next few years, so we will be seeing more and larger size offering (this will be one of the factors driving more liquidity in the industry).
I also expect some interesting moves in Japan, and Europe in terms of security tokens and related technology adoption in the industry.
What would you personally like to see develop in the security token ecosystem?
First and foremost – more liquidity. I think it is at the top of everyone’s list in the ecosystem.
But there are some other things I would like to see develop. For example:
- More attractive offering in the security tokens space (imagine Space-X issued as security tokens for example)
- Evolution of securities regulation, accounting for security tokens technology capabilities that are far superior to the old paper securities system which guided the creation of current securities regulation.
- Ability of security token exchanges to share order books. For this to happen, exchanges will need to collaborate, agree and adopt protocols allowing this sharing and execution. This will, BTW, help liquidity growth over time.
You’re also the Co-Founder of Securitize, what are some of the exciting developments happening at this exchange?
I would leave most of this story for Carlos Domingo, my partner and the captain of this amazing ship to tell. However, some of the nuggets:
- The expansion of securitize services: Securitize now offers a full suite of services including fundraising management, tokenization, regulatory compliance, execution, and secondary trading.
- Securitize becoming a transfer agent and the acquisition of Pacific Transfer – making it a top 10 US stock transfer agent. This is exciting also because it combines the “old world” with the new world of securities.
- The growth we have seen since the recent launch of Securitize Markets in digital securities traded on the exchange and investors registered to Securitize is very promising as well.
Is there anything else that you would like to share about the SPiCE II fund?
SPiCE II is launching first as a traditional VC fund, as we are targeting more institutional and semi-institutional investors. A tokenized version of SPiCE II is planned launch in a few months.
The ecosystem has evolved significantly since the launch of SPiCE I, so although our investment strategy is similar, I expect SPiCE II to be more diverse (industry-wise and geographically) than SPiCE I.
I expect to see more opportunities for infrastructure and corporate/industry plays for SPiCE II due to the higher corporate adoption of Blockchain technology.
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