Average investors — those of us who don’t belong to an elite institutional class, for example — wanting to invest in a venture capital fund that supports emerging blockchain technologies will soon be able to do so.
Blockchain Capital, a venture capital firm that invests in blockchain technology companies, in collaboration with digital finance investment bank Argon Group, is about to issue its own Ethereum-based digital tokens called BCAP.
The move is part of a new liquidity-enhanced venture capital fund called Blockchain Capital III: a combination of a traditional limited partnership and the BCAP digital token, which will be sold in an upcoming initial token offering (ITO).
Brock Pierce, managing partner at Blockchain Capital, believes that with this move they are “democratizing access to an asset class traditionally only available to elite institutional investors.”
Democratizing Venture Capitalism
Here’s how it works. According to Pierce, Blockchain Capital is “providing the investor base across the globe with the opportunity to invest into a leading venture fund via a liquid, tradable, digital token.”
Traditionally, venture fund investment has been restricted to an elite class of investors, including wealthy university endowments and politically connected unions and pension funds. These typical venture fund investments are also highly illiquid, locking up funds for terms as long as 10 years.
During the initial token offering period, average investors who want to diversify and get exposure to the surging growth in blockchain startups can purchase BCAP tokens representing digital interests in the Blockchain Capital III VC fund, using bitcoin, ether or U.S. dollars.
Unlike traditional VC fund investments with their 10-year terms, liquidity barriers are overcome since these tokens will soon be able to be bought and sold on secondary markets via established digital currency exchanges. Those exchange partnerships have yet to be announced but are in the works.
In an interview with Bitcoin Magazine, managing partner Bart Stephens explained that BCAP tokens follow the SEC exemptions for unregulated securities — the same structure as bonds and high-yield debt — under Regulation D, allowing them to be sold in the U.S., as well as Regulation S, allowing them to be sold internationally.
“We’re playing within existing guidleines,” said Stephens, “but offering something new.”
Walking the Blockchain Walk
Launched in 2013, Blockchain Capital’s initial fund was the first venture capital fund dedicated to the Bitcoin and blockchain ecosystem. It was also the first fund to accept capital calls in bitcoin.
The Argon Group, which is collaborating with Blockchain Capital on this initiative, is a major player in the emerging digital currency and token-based capital markets.
“We are pioneering a groundbreaking moment in the history of venture capital by using blockchain technology to provide never-before-seen liquidity and access to investors,” said Stan Miroshnik, CEO of The Argon Group, to Bitcoin Magazine. “By investing in venture capital through a digital token, investors get liquidity, transparency, clear view on value and an ability to participate in an asset class previously reserved for elite institutions.”
Blockchain Capital’s current portfolio is comprised of 43 unique companies from its prior two funds. These include Bitfury, BitGo, BitPesa, BlockCypher, Blockstream, Chain, Coinbase, Gem, GoCoin, itBit, PeerNova, Ripple, Wave and Xapo, among other blockchain technology leaders.
This investment focus of the new fund is expected to further Blockchain Capital’s established reputation of identifying outstanding blockchain technology companies led by ambitious management teams and partnering with them to accelerate growth.
“I’ve never been more excited in my whole career,” said Stephens, an experienced fintech exective, hedge fund manager and venture capitalist. “We think it’s a great thing for the overall ecosystem. We think it’s a great thing for the hobby industry of venture capital. Venture capitalists like to talk about disruption and innovation but very few of them walk the walk. We are actually using blockchain technology to disrupt ourselves. It’s always a little uncomfortable but I’ve always said if we don’t do it someone else will.”
Full details of the offering will be disclosed in the offering memorandum, which is expected to be published on April 3, 2017, via vctoken.com.