Blockchain Capital, which focuses on investing in bitcoin and blockchain startups, announced late February its intentions to raise $50 million for a new fund partly through the issuance of a proprietary digital token.
The San-Francisco-based firm’s Managing Partner, Brock Pierce, said in an interview that an Initial Coin Offering (ICO) would finance a part of their third blockchain fund, where the company will issue their digital token to investors. The remainder of the money for the new fund will come from traditional Venture Capital (VC) fundraising activities.
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The Blockchain Capital Digital Token ICO
The ICO for the digital token will take place in the next one or two months, according to the company, and will be tradable on the secondary market. No specific cryptocurrency exchanges have yet announced that they will list the new coin. However, Blockchain Capital is in talks with several exchanges and has also stated that the TokenHub may issue the new tokens.
ICOs have become an immensely popular way of funding for startups in the blockchain space but, also, for cryptocurrency investors as the value of new tokens can increase substantially in a relatively short period of time. The prospect of rapid profits makes ICO investing highly lucrative for investors but as the ICO market is still entirely unregulated, there have also been issues with scams and severely underperforming digital assets.
Given Blockchain Capital’s assortment of active blockchain investments, which include Abra, BitPesa, CoinBase, Kraken and Ripple, and its range of exited investments, which include Authy, Bitnet, and ChangeTip, a digital token linked to the success of new blockchain fund by the VC firm will likely attract investor attention.
Blockchain Capital’s Startup Investments
Since its inception in 2013, Blockchain Capital has made 42 startups investments in which $40 million in total has been invested. The focus, of course, is on blockchain startups and the investments tend to be around $500,000 per startup, according to Pierce.
Aside from the holdings mentioned above, Blockchain Capital is also an active investor in reputable startups BitFury, Blockstream, BTCC, Chain, Noble Markets, Peernova, and Xapo, among others.
Will Digital Tokens Become Standard in the VC industry?
Brock Pierce believes that issuing digital tokens for VC funds will disrupt and democratize the venture capital industry as it allows anyone with access to the internet to invest in a VC fund by purchasing its digital token. To an industry that is currently only accessible to high net worth individuals with connections to the right people, cryptocurrency may bring a welcome change.
If more VCs decide to go down the route of issuing digital tokens to raise funds and the financial regulator creates an investor-friendly regulatory framework for this innovative new way of funding, then we could see private investors pouring money into VC funds; in turn, boosting entrepreneurship and innovation around the world.