The State of Investment into Security Token Infrastructure — Q2 2020
The year of the security token finishes its first half with the ‘Corona Quarter’ coming to a close — let’s review the impact and industry financings.
It’s officially a new quarter and we’ve got the latest round-up of investments into Security Token Infrastructure from the previous quarter below.
The punchline: Roughly $6,000,000+ was invested in Q2, with increased M&A activity with undisclosed acquisition terms. The result of the Coronavirus epidemic on the industry is clear, financings have slowed to nearly a full stop, while some companies have already begun taking advantage of the situation.
The largest financing of the quarter was a transaction that was supposed to originally occur over a year ago at 80x the size. Tzero’s now $5,000,000 investment from Golden Sand Capital (Originally GSR Capital) was restated and officially finalized in April. Meanwhile, the exchange itself sees record volume and growth since its listing of the digital overstock preferred share. In the same month, MERJ concluded its 4-month global STO, which became one of the first tokenized IPOs in the world.
Other than that, no other investments were made into issuance platforms or other infrastructure companies. Many industry companies launched new products and partnerships, with one, in particular, becoming very active. Republic, the crowdfunding portal sister company of Angel List, acquired two different sub-set vertical crowdfunding companies to expand into; video game development and fractional real estate with Fig and Compound, respectively. None of these offerings are tokenized, but given that the firm has a security token advisory arm and is launching its very own STO to raise capital, one would expect more STOs to come from the platform.
As the appetite for investment slows down due to Corona creating a demand for liquidity and cash hoarding, the industry has felt it in Q2. This hasn’t stopped the industry from continuing to deploy the previous $850,000,000+ that has already been raised. STO financings, exchange listings, and more marketplaces going live all point towards a booming industry to come. The question remains whether the economic conditions will push the year of the Security Token into 2021 or if it becomes the next big thing in the second half of 2020. Our prediction is that Q3 will have a slight increase in financing activity but nowhere near to 2019 averages. Instead, we anticipate even more M&A activity than the last 3 months.
As always, we will continue to update this list as we find new information. Our last update was on July 6th, 2020.
Issuance Platforms
No issuance companies that raised money this quarter have been identified at this time.
Exchanges
Tzero, New York — $5,000,000 investment by Golden Sand Capital (Previous financing via $128,000,000 STO (TZROP))
MERJ, Seychelles — $1,000,000+ STO
Other Infrastructure Companies
No infrastructure companies that raised money this quarter have been identified at this time.
DeFi, Crowdfunding or FinTech Companies Also Offering STO Services**
LayerX, San Francisco — $27,500,000+ investment by JAFCO, ANRI, and Yahoo Group
Abra, Mountain View — $5,000,000 investment by Stellar Development Foundation
BlockFi, San Francisco — Undisclosed investment by Three Arrow Capital (Previous financing of $108,700,000+ by Morgan Creek, Valar Ventures, Galaxy Digital, and ConsenSys)
Mergers and Acquisitions
1exchange, Singapore — Undisclosed majority stake sale to AMTD Group
UK Fintech Worldwide, London — Undisclosed sale to Molinari Media
Fig, San Francisco — Undisclosed sale to Republic (Previously raised $7,800,000)
Compound, New York — Undisclosed sale to Republic (Previously raised $2,000,000)
Currently fundraising category (notable mentions):
Celcius, San Francisco — Seeking $15,000,000 (Previous ICO of $50,000,000)
Republic, San Francisco — Seeking $8,000,000 via a Revenue Sharing STO (Previous financing of $12,000,000 from Binance and NEO)
We will continue to update this list with missing information about Q2. Stay tuned and subscribe to see the Q3 report in October!
*Also does issuance.
**Not applied towards the total investment into Security Token Infrastructure due to some of the capital being invested towards non-security token infrastructure.
