Interview: Carlos Domingo (Spice VC)
Carlos Domingo is the former CEO of “New Business and Innovation” at Telefónica and now co-founder and managing partner at Spice VC. He has been recently awarded as best Business Angel by Big Ban angels 2017.
1- Why have you chosen to use Blockchain in a Venture Capital fund?
Our goal was to create a different type of VC where the investor has liquidity and it is also more inclusive so we can allow smaller investors to be part of the project. Blockchain technologies and the possibilities of issuing tokens that are digital representation of an economic interest in an asset (in our case, the fund itself) allow you to do this and it is one of the greatest innovation that public blockchains have brought to the market. Almost any liquid asset (and VC investment are one of the most liquid ones) lends itself well to moving onto the blockchain and becoming tokenized. It allows to create a deeper market with improve price discovery and improving liquidity has a premium so it will increase the value of those assets as well.
2- Who is behind Spice VC?
3- Which type of token are issuing, a security or an utility token? What is the legal framework of your token and ICO?
We are using a security token since we are tokenizing a fund and the economic interest in a fund is clearly a security. We decided that, as opposed to other projects, we did not wanted to try to find a convoluted utility for our token that would allow us not to call it a security and sell it differently. In our case since we are a security we need to follow the security laws in each jurisdiction that we are selling into. In Europe, we are registered as and Alternative Investment Fund with the FCA (the regulator there) and this means that in each country, although we have restrictions about direct marketing, we can sell to a limited number of retail investors and to an unlimited number of accredited investors. In the US, we have filed an exception with the SEC to not register as a security under Reg D and this means that we have to limit ourselves to a maximum of 99 accredited investors.
Overall, in our experience, while running a security token sale is a bit more cumbersome than just doing a pure crowdsourcing of a utility token (you need to do KYC/AML checks, you have certain limitation per jurisdiction about the type of investors you bring, etc) it is not that complicated and it is definitely worth the trouble to stay within the law.
4- In your opinion, which features must have a blockchain startup to be attractive for investment?
At the moment, most of the action happens at the protocol and platform level although we have seen a number of interesting companies at the app level coming up into the market lately. To me, there are certain things about a blockchain startup that are just common with any other startup, meaning, the meaningfulness of the problem they are solving, its importance and potential market size, the ability of the team to execute, etc. And then if they are selling tokens instead of equity, we usually look at the token economics to make sure that they make sense and the price is right and there is upside in the value for it so it is worth investing. This later part is what still is very immature for most of startups in the blockchain space and where we are trying to add value.
5- How do you think regulation will impact on blockchain?
I think that regulation is a good thing as far as it is not disproportionate. I like the reaction to ICOs that the SEC has had (basically laying down there rules and also going after a few clearly scummy ones to signal the market about their desire to enforce it) but I do not like the reaction of China with an outright block. In any case I am positive this is an unstoppable trend and regulation will come and will rationalize things but will not stop the growth and the progress.
6- What role do you think decentralization will play in the future of banking?
I think that the future is decentralize. With blockchain technologies the value add of a decentralize entity to bring trust to the system (and charge high commissions on the way) will disappear. I see the new public blockchain as the new internet of value as opposed to the current Internet of information and content. The same way that the current Internet disrupted anyone that was over charging to intermediate with how information or content flow from people to people (like the record labels with music or the telcos with messaging and voice), the new internet of value will be doing the same thing to anyone that intermediates with value and trust since people will be able to achieve the same in a decentralized way and without very large commissions for doing so.
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