Blockchain Capital recently raised $10 million for a venture capital fund, Blockchain Capital III Digital Liquid Venture Fund, LP, which it calls the first venture capital fund raised by a digital fund offering.
The venture capital firm’s new digital liquid venture fund recently raised funds through a digital token offering called BCAP token.
The Ethereum-based tokens will represent a partial ownership in the fund. The tokens will be issued on May 10.
“The $10 million will be used to invest in blockchain startup companies,” Brock Pierce, managing partner at Blockchain Capital, told CCN. “We will be investing in the equity of these startups and will also consider token-based offerings.”
“We’re excited to be the first venture capital firm to offer a tokenized security in a legally compliant manner, Pierce said. “We see this as a marquee turning point for the venture capital industry and the way startups raise capital. We believe this structure is superior for investors and startups alike. As a result, we expect and welcome other venture capital firms and startups to follow and build upon the path that we’ve pioneered.”
“We’ve made targeted investments across the major opportunities for blockchain technology, which includes cryptocurrency companies, blockchain companies targeting financial services, and companies that are applying blockchain technology in a range of other verticals from healthcare to media,” Pierce said.
Blockchain is still a relatively nascent technology that can be difficult for generalist venture capital firms to fully comprehend, Pierce noted. “As such, we think the blockchain industry is currently best served by specialist investors like Blockchain Capital that can get into the weeds of the technology and its potential,” he said.
For investors, the single biggest advantage the venture fund will provide is enhanced liquidity. Pierce said investors that own the BCAP tokens will be able to sell or trade their position much easier than has ever been possible for a venture capital investment. The token is issued by a Singapore entity and takes advantage of the JOBS Act securities law in the U.S.
“For startups, financing with Blockchain Capital is advantageous because we leverage our years of experience and deep proprietary network of founders, entrepreneurs, service providers and investors to help our portfolio companies succeed,” he said.
Criteria for investments is determined on a case by base basis, Pierce said, but in general, Blockchain Capital seeks companies that have a significant business opportunity solving real-world problems with blockchain technology. “In addition, we look closely at the credentials of the team, the size of the potential markets, and the defensibility of the business opportunity,” he said.
While BCAP is technically an altcoin, the intent is different than traditional altcoins that hope to supplant the major cryptocurrencies like bitcoin and Ethereum, Pierce said.
“Our investors see the same gap in venture capital that we did when we started down the ICO path – the need for venture funds via a liquid, tradeable, digital token that still abides by all regulatory compliance rules,” Pierce said. “Together, we expect to democratize the venture capital industry and provide a unique product to the broader crypto investment community.”
Bitcoin entrepreneurs Matthew Roszak, co-founder and chairman of Bloq, Vinny Lingham, co-founder and CEO of Civic, and Andrew Keys, head of global business development at ConsenSys, are among the early investors in the fund.
“The initial coin offering not only aligns with our traditional values and investment beliefs, but furthers our confidence that the venture capital industry will soon offer more flexibility in today’s market climate,” said Lingham.
“Blockchain Capital is revolutionizing venture investing by unlocking liquidity in previously illiquid secondary venture markets by tokenizing assets via Ethereum,” said Keys. “Capital markets will be forever changed by this type of financial instrument innovation.”
Several technology partners are supporting Blockchain Capital for this offering. Civic, a blockchain identity provider, will contribute its blockchain-based KYC/AML technology. ConsenSys Diligence will review the token’s smart contract. Jaxx, an Ethereum wallet, will support the token.
The Argon Group’s Argon Investment Management LLC managed the offering under Regulation D Section 506(c) and Regulation S exemptions from registration with the U.S. Securities and Exchange Commission.
Featured image from Shutterstock.
Last modified (UTC): April 16, 2017 14:43