Security Token Funds: Everything You Should Know
It has never been this easy for startups to raise funds for their projects. Blockchain technology and cryptocurrencies have opened many channels that enable entrepreneurs to secure funds faster. Some of the latest fundraising techniques include; initial exchange offerings, initial coin offerings, equity token offerings, and many more. In this post, we shall focus on security token funds.
But what are security tokens?
Security tokens are digital securities on a blockchain infrastructure. Startups mostly issue them during a token sale in the form of ownership of shares for fundraising purposes. Since security tokens are far better than traditional equity, there is a high possibility that they will become the preferred funding model in the future.
To drive the point home, think of security tokens this way: you invest in a company and receive a token instead of the usual digital or printed share certificate. The token contains coded restrictions on sale and transfer that are agreed upon at the time of investment.
Why use security tokens?
Security tokens are more straightforward, easier, and safer than traditional shares because:
- Tokens are digital. They are easy to account for, track, and impossible to counterfeit.
- Transaction costs are close to zero
- Tokens are easily divisible; they enable fractional ownership without creating overheads.
- They are liquid. Unlike equity investments in startups that are illiquid for long periods, security tokens can become liquid within a short period, sometimes even immediately. This allows for the ability to realize faster returns, get your returns anytime, and greater ease of rebalancing an illiquid portfolio.
- Security tokens give room for greater flexibility. For instance, instead of investors receiving a percentage of profits, they receive a portion of revenues.
- Sometimes, depending on regulation, security token offerings require fewer disclosures as compared to IPOs and other traditional offerings. This dramatically cuts the costs of issuing companies.
With all these advantages, security tokens are likely to attract a large number of investors, including token investors and traditional equity investors.
In the near future, most companies will use security tokens instead of shares, assuming regulation will not create obstacles.
What about security token funds?
Security tokens funds are the lifeblood of the security token ecosystems. They provide funding and support.
You see, growing a startup is not just about the money. Projects should look for “smart money”: investors that are ready to open their network as well as offer mentorship.
Here are funds that have invested in STO’s and related projects:
Neufund
Neufund is a privately owned German company that provides an end-to-end solution for asset issuance and tokenization. The company has an open-source set of protocols that enhance ownership and enable anyone to represent real-world assets on the Ethereum blockchain in the form of legally binding security tokens.
Sequoia
Don Valentine founded sequoia in 1972. The company is one of the original venture capital funds established to provide early capital needed to transform Silicon Valley into the global tech hub it is today. The company has since invested in Apple, Google, NVidia, Cisco, PayPal, LinkedIn, Atari, and YouTube, among many others.
Sequoia is a highly recognized brand name in the VC industry. It also boasts of a long list of companies that have launched their IPO’s and gone on to become successful global names. Another advantage of sequoia is its flexibility in structuring investment deals and its founder friendliness and willingness to invest in businesses at different stages and geographical locations.
InvestaCrowd
InvestaCrowd is a Singapore based investment platform founded by Julian Kwan and Alice Chen. The platform is licensed by the Monetary Authority of Singapore to deal with securities and deliver top of the range investment products using blockchain technology.
Other members of the InvestaCrowd team include Ole Michal Walden, the CTO, William O’Donnell, the Director of Investor Relation, and Gabriel Abed, the advisor.
InvestaCrowd has partnered with BlockxBlock, 500 startups, Novelty, and novelty curve.
a16z
A16z is a Silicon Valley venture capital firm founded by Ben Horowitz, Marc Andreessen, and Andreessen Horowitz in 2009. The company backs entrepreneurs who wish to build the future through technology. They fund consumer as well as enterprise companies in their early or late stage. Currently, a16z has raised $7.1billion across seven funds. By June 2018, the company had raised $300 million for its first dedicated cryptocurrency fund.
Some of the pros of a16z include:
The company brings traditional venture capital methods to the cryptocurrency industry. The company focuses on business fundamentals, supporting founders even from an operational standpoint, and practical use cases.
Also, the company is flexible in structuring investment deals. It also invests in business from all geographical locations, at any stage of their growth using both tokens and traditional instruments such as convertible notes and equity.
Swarmfund
Swarmfund is a decentralized capital market place that can be accurately described as the blockchain for private equity. The company uses the power of blockchain to democratize investing. It also uses asset-backed funds and cryptocurrency tokens to open high return investment classes to smaller investors.
The company was founded by Philipp Pieper, the CEO and Co-founder and Timo Lehes, the Co-founder and C-Invest-O. The project’s advisors include Chris Kitze, Anthony Di Lorio, David Drake, Robert Rosenblum, Vivek Krishnappa, Joel Diets, Adam Apollo, Mathew Tan, Brad Nye, Mark Oei, Bogdan Fiedur, Gabriel Zanko, Hideto Tomabechi, and Mark Friedler.
Swarmfund has partnered with WINGS, OpenFinance Network, AmaZix, Maker, SecureVote, Jaxx, and Distributed Lab.
Fenbushi capital
Fenbushi Capital was founded in 2005 as the first Venture Capital in China that exclusively invests in Blockchain-enabled companies. Some of its most notable investments include Zcash, Factom, Circle, and VeChain.
Fenbushi Capital is a highly recognized brand name in the cryptocurrency industry. Cryptocurrency projects seek funding here not only for capital injection but also as a stamp of approval.
The company’s recent investments show an initiative to support more companies that offer immediate blockchain applications to existing industries.
The company’s status as a high profile investor gives other investors the motivation and confidence to invest in Fenbushi-backed companies. This means that the company can syndicate larger deals.
The Fenbushi capital’s team includes Feng Xiao, General Partner, Bo Shen, General Partner, and Vitalik Buterin, advisor.
SPiCE
When spice was started in 2017, it seemed like a distant idea. The managing partners, Carlos Domingo, Tal Elyashiv, and Ami Ben David started by tokenizing the company to prove that their idea was valid. Since they were pioneers in the security token area, they had to come up with much of the regulation that is currently in use in the industry. They also had to build the first generation of the technology themselves.
Spice has partnered with Bancor, Cooley, Crowdcube and Allen & Overy. The company’s advisors include Brendan Eich, Eyal Herzog, Loic Le Meur, and Nimrod Lehavi.
DLT Capital
DLT Capital is an international ICO and Blockchain consultancy. The projects team is composed of industry specialists with vast experience in VC, traditional finance, Fintech, ICO’s Blockchain programing, and other related fields.
The team includes Nico Konrad, Sergej Stein, Kerrsten Schutze, Jasmin Gungor, Philipp Lesche, Niklas Von Heyden, Robin Betz, Frederik Von Mohl, Yingyi Men, Manuel Muller, Ivan Jelic, George Runge, and Katrin Wahl.
The project advisors include Prof. Dr. Philipp Sandner, Daniel Grassinger, Benjamin Leiding, PHD, prof. Dr. Andranik Tusmasjan, Scott McKenzie, PHD and Dr. Stefan Gros.
SOSV
SOSV also known as accelerator VC, is a fund that only invests in early-stage companies through accelerators. The fund runs accelerators across the world in biotechnology, internet, hardware, mobile, food, and pharmaceuticals.
SOSV has an accelerator based in Shanghai that ranks fourth on the list of most active blockchain investors based on the volume of investments in the blockchain space. The fund’s corporate innovation program is particularly crucial for large blockchain companies and corporates who have already raised capital through an initial coin offering but still need to solve a real-world business problem.
Sosv’s mentorship-driven program is vital for early-stage startups as it helps them access advice from industry-leaders, therefore, saving them time and money.
Memorandum capital
Memorandum capital focuses on investing in blockchain-based assets at an international level. The company has a presence in numerous regions, including Asia, Australia, and Europe and in the UK where it was incorporated.
The companies team includes Aleksandrov, managing partner, Adam Major- Machnacki, CFO finance and legal, Paulina Bernas, business development manager, Pawel Sobotwowsla, associate, K Suoboda, associate, Martin Novak, associate and Tomasz Korwin tech consultant.
The company also has more than 50 specialists who have vast experience in private equity, venture capital, and investment banking.
Issuance
Issuance engages, connects, and matches digital securities with investors.
Digital securities are the next big trend in capital markets. Securities provide investors with real ownership interests in the hinged asset or company. Digital securities offerings are a compliant alternative to initial coin offerings. They offer investors 24/7 trading, liquidity, and access to a global pool of investor capital.
The issuance team includes; Darren CEO, Christian Shelton, CMO and co-founder, Aaron Mendez, chief strategy officer, and co-founder, Josh Cannon, VP of sales, and Vanessa Bris, marketing production manager.
AmerX
AmerX is an SEC and FINRA-registered broker-dealer and a member of the New York stock exchange. The company has a well-experienced team with decades of experience in the fast-moving financial markets.
They maintain a large global client base made up of both private and public companies.
The AmerX team includes Fady Tanios, the founder and CEO, Brian Fraioli the Chief Compliance Officer, John Wisniewski, the chief operations officer, Conn Davis, the investment banker, and Aaron Ford, the operations lead.
Pantera capital
Pantera Capital is an investment firm that deals exclusively with venture tokens, and projects related to cryptocurrency, crypto assets, and Blockchain technology.
Pantera is a highly recognized brand name in the crypto sphere. Crypto-related projects seek their investment not just for the money but also for their stamp of approval.
Before 2014, Pantera operated as a global macro hedge fund that included a middle east long-only fund, a systematic FX-only fund a global consumer long/ short equity fund, and an Asian long/short equity fund. The experiences that the company gained may be beneficial should it choose to direct some of its funds towards security token investment.
Another advantage of Pantera capital is that its status as a high profile investor can effectively motivate other investors to back the projects or companies that Pantera has invested in.
The Pantera team includes Dan Morehead, the CEO, Joey Krug the co-Chief investment officer, Paul Veradittakit, Paul Brodsky, Bill Healy, Dan Morehead, Matt Gorham, Ryan Davis, Joey Krug, Lauren Stephanian.
Coin capital
Coin capital is a multi-manager hedge fund that exposes businesses to more than 40 cryptocurrencies distributed spread across several investment strategies.
The multi-manager strategy, whose fund managers are highly experienced, is effective in providing risk diversification in an industry known for huge coordinated macro swings.
The Coin Capital portfolio fund management team includes Dan Morehead, Joey Krug, Linda Xie, Jordan Clifford, Peter Kambolin Dr. Alexi Checkhlov, Steven McKie, Chris Russ, and Kyle Forkey.
The other team members include Jeff Nabres, the managing partner, Ryan Ballman, partner and advisor, and Larry Sheffield, advisor.
The project’s advisors include Ryan Ballman, an entrepreneur and software engineer at MJ Freeway, and Larry Sheffield, the CEO at Larry Sheffield development.
Final word
All said done. There’s no doubt that security tokens and security tokens funds are the future of investment in both the crypto and real-world investment.
Security tokens offer investors a direct, liquid economic interest as well as expedited delivery of proceeds. Also, they offer the potential of opening up asset ownership to a wide variety of people.
What’s more, security tokens funds provide startups with both funding and support that’s critical for successful project implementation.
We hope this article helped you understand the security token ecosystem. We are happy to read your thoughts, and answer your question the comment section below.
