We Have Lift-Off. SPiCE VC publishes its quarterly NAV report and portfolio.
The Ongoing Story of the First Fully Tokenized VC Fund, and what we’re looking to invest in going forward.
TL;DR : in its first NAV report for Q2/2018, 3 months after the first closing and issuing the tokens, SPiCE VC’s showed a NAV of $1.38 per token. Tokens were originally sold to investors for between $0.80-$1.00 . At the time of releasing the report SPiCE had 5 portfolio companies.
UPDATED for Q4/2018: The final NAV of 2018 is $1.31, Full report Q4 NAV report here.
UPDATED for Q3/2018: As a VC fund, the NAV typically changes when major events in existing portfolio companies take place. In Q3 there were no such events, and therefore the NAV remained stable with only negligible currency fluctuations, and is at $1.37. In addition, two investments were made in ROX and INX, Full report Q3 NAV report here, and details of the new companies added below.
At the end of March 2018, we announced the first closing of the world’s first fully tokenized VC fund, SPiCE VC. This was the end of the first leg of our Journey, which started when security tokens almost didn’t exist, and ended 9 months later with Security Tokens being widely recognized as the future of securities. We are now closing the second leg of our journey, with the publication of our first quarterly NAV report and initial portfolio.
The emerging security tokens industry is accelerating rapidly, but until now there are very few security tokens that actually launched — SPiCE being one of the very first. It is important to show the market that this new industry is bringing new standards to the blockchain space. Standards of quality, value generation, regulation-compliance, and real, stable business benefits and use cases.
It is clear that asset owners want to tokenize, we’re seeing billions of dollars worth of assets looking to tokenize across our portfolio companies, and why wouldn’t they — there are massive advantages to tokenizing. It is also clear that many people believe in tokenization — a whole industry is being born in front of our eyes, I personally talked to dozens of companies entering the space. But — the big challenge is the next piece of the puzzle, the institutional investors. They are already starting to invest in security tokens, and our role as is to help accelerate that trend by funding the deployment of the infrastructure, building the use cases, supporting the best ideas and companies and gaining institutional trust.
The market and our role in it.
As the first fully tokenize VC fund, we have developed a unique expertise and leadership in the market we helped pioneer — Security Tokens. When we started talking about a token-based securitized fund a year ago, very few people knew what it was because it effectively did not exist — we had to practically invent most of the legal and regulatory infrastructure and the technology to support it. By December 2017, it became clear that at least in the US most ICO activity is going to be deemed securities, and by now the market is quickly realizing that there’s actually something much bigger here than just ICOs, security tokens have the potential of tokenizing the ownership of trillions of dollars worth of assets worldwide.
It took Apple 40 years to reach a trillion $ market cap. Based on the size of the asset classes suitable for tokenization, potential advantages of tokenization, and the trajectory of the tokenization ecosystem, we believe that the asset tokenization industry has the potential of becoming the fastest industry to go from zero to trillion dollars and well beyond, so the next Apple could be hiding in there.
This market is only just starting, and innovation will come in many forms. We are therefore looking to talk to ANYONE building tokenization related technology and infrastructure — entrepreneurs, seed investors, developers. We want to talk, and the earlier, the better!
We believe this industry is at such as early stage that partnering, learning from each other’s achievements and mistakes and helping fund the right ideas — is the best way forward, and we’re happy to contribute, share our knowledge and learn. Best way to contact us is on firstname.lastname@example.org
The NAV Report
At SPiCE VC, we are committed to transparency and accountability, and therefore we will publish a NAV report every quarter. The NAV is a $ figure that reflects the Net Asset Value of the fund per token. The calculation is done per token, so that people can easily compare it to the price they paid for the tokens.
Why is the NAV relevant? The SPiCE tokens main innovation was that they were designed as a financial commitment to pay token holders the net revenues for all future exits . The payments will go directly to token holders by buying tokens back from them (and not in the open market or by burning tokens to reduce supply). This means SPiCE token holders do not depend on liquidity. Even in a worst case scenario assuming low liquidity, the value of the assets will eventually be paid back to the token holders, and that’s why the net asset value is a reasonable approximation for the value of the tokens — again, regardless of market price.
Our first quarter of activity ended in June, and after working with our accounting firm EY, we have now published it.
The SPiCE VC NAV per token, as of June 30th 2018 is $1.38. This simply means every token represented assets with an estimated value of $1.38.
For comparison, the tokens were sold to investors at the STO three months earlier, at between $0.80-$1.00.
While the crypto market suffered a substantial decline this year, the ecosystem for security tokens is attracting massive interest and growth, and we are at the center of this revolution. This demonstrates a point we have been making — that security tokens are not subject to crypto volatility, because they represent investments in real assets, real companies, and can continue to grow based on the quality of the underlying assets even while the crypto market is falling.
The total Assets Under Management is $15,609,762 — 56% of which is in the value of our portfolio companies. At the end of the pre-sale stage we had higher commitments, especially from crypto investors, but due to the crash in crypto market around February and March, some of the larger crypto commitments disappeared or were significantly reduced. Please read the report, including further information, notifications and a list of portfolio companies: Read the Full Report.
Our Portfoilio and investment strategy.
SPiCE is now widely regarded in the industry as an expert tokenization, and we have decided to maximize our competitive advantage in this fast expanding market, and focus for the short and medium term on investing and initiating projects in three investment categories.
First category — Tokenization ecosystem investments:
If the securities tokenization market is indeed to grow from zero to trillion dollars in a very short period of time — we, the industry, need a complete infrastructure to be created from scratch to support this growth. From protocols, to issuance, exchanges, banking services, broker dealers, media, analytics, etc. When there’s massive growth, selling infrastructure is always a massive opportunity. SPiCE is uniquely positioned to identify the gaps in the market, understand the required solutions, have access to most players, and bring significant added value to companies we invest in.
Portfolio companies in this category include:
Securitize: Securitize is the leading issuance and lifetime management company for security tokens. The company caters to large projects, and provides a high-end full service, from the protocol level with the DS Protocol, to management of the sale, to issuance of tokens, and then lifetime management of the tokens. The DS protocol published by Securitize, is by far the most comprehensive protocol in the market, and the company has already 16 signed projects which have started rolling out in February. Securitize is a major player in the ecosystem, and is now raising funds privately to accelerate its growth.
Saga: Saga is an upcoming stable currency, supported by institutional and banking partners. We identified a stable coin as an important infrastructure piece in the growth of the security token market. Because while security tokens are held and managed “on-chain”, currently, financial transactions, including investments and dividends are manage inefficiently with Fiat, because the cryptocurrencies are too volatile to be used in that way. Saga is solving this problem with a fiat currency backed token, based on a model developed with advisors such as Jacob Frenkel chairmen of JP Morgan Intl, and Noble Prize winner Myron Scholes. We will work with Saga to integrate their solutions into our other portfolio companies and partners.
Slice: Slice is a platform for the tokenization of real estate assets. Real estate is going to be one of the most important verticals for security tokens, with hundreds of trillions of dollars worth of assets — the vast majority of which non-liquid. Over the last few months we have seen multiple companies in the field, and decided to make our first investment in this vertical in Slice because most players we saw in the field were either real-estate experts with less tech knowhow, or technology experts with less real estate know how. With the Slice team we found a fast moving team of tech experts combined with significant real-estate experience, a strong business model and a clear vision that we share, for how the market for security tokens in real estate can be scaled. This is a relatively new investment, stay tuned…
New portfolio companies added in Q3:
ROX is a exchange for real estate security tokens targeting the institutional market. In process for a full exchange license, to become the first real estate dedicated security token exchange.
INX is building a fully-regulated digital asset and security token trading platform, targeted mainly at institutional investors.
INX’s approach to regulation is unique because it is pursuing licensing from multiple regulatory bodies on parallel paths:
On one side, INX is working to become a FINRA-registered broker-dealer and seeks to register and comply with the regulations of the SEC and CFTC regarding the trading of digital assets and derivatives of digital assets.
On the other hand, INX was one of the first companies to submit a no-exemption F-1 Prospectus (similar to a S-1, but for non-U.S. based companies), for a registered offering of its INX security token. The aim is to launch the first security token offering registered with the SEC, which will be available to the general public, and not just accredited investors. This token will also serve as a utility token on the INX platform for fee payments, collateral, and rights to the distribution of the company’s operating cash flows.
Keep watching this category… this is where we put a lot of our resources.
Second category — tokenized projects:
In this category we take advantage of our unique access to deals in the space, and the fact we see a lot of the projects very early on. We will therefore make some investments in tokenized projects where we see a unique fit with the fund’s goals.
Portfolio companies in this category include:
GraphPath: Graphpath aims at democratizing the development and management of knowledge graphs at scale. Knowledge graphs enable companies to turn big data to knowledge and insights, much like Facebook is doing internally with it’s own graph. GraphPath is developing GraphOS, which aims to put knowledge graphs on the blockchain. GraphPath is gearing up to raise funds via security token in the near future.
RNDR: RNDR is OTOY’s token based rendering network. It enables distributed GPU rendering on the blockchain, using OctaneRender which is the world’s first and fastest GPU-accelerated, unbiased, physically correct renderer. Octane uses the graphics card in networked computers to render photo-realistic images super fast. With Octane’s parallel compute capabilities, users can render works in a fraction of the time, and at a better cost than centralized services. RNDR is currently the fund’s only pure utility token investment — in a use case where the token is actually delivering utility in a network, using proven technology to deliver a service with a real and strong market.
Third category — Core blockchain infrastructure:
When looking at the potential growth of the tokenization market, we anticipate significant demand for blockchain resources and services. Most current implementations run on top of Ethereum, however Ethereum is lacking in both functionality and throughput. We believe there is a lot of value in this layer of the ecosystem, and looking for solutions at the protocol and network level that will enable the growth and functionality to reach the scale we envision for our market.
We are looking at multiple projects in the space, but have not yet made an investment in this category.
Again, if you are an entrepreneur or early investor in the space, and working on an idea, a plan, a company — let’s talk!