Category: Venture Capital

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VC firm speculates that blockchain could be worth trillions

Categories Blockchain, Cryptocurrency, ICOs, Technology, Investment, Venture Capital

VC firm speculates that blockchain could be worth trillions

A New York-based venture capital firm, Union Square Ventures that manages over $1 billion in assets, has given the cryptocurrency investing industry a big boost by saying about its belief in the potentially worth of trillions in the future.

The leading VC firm has already heavily invested in the popular San Francisco-based cryptocurrency exchange, Coinbase. However, it currently has no plans to launch a stand-alone fund.

Investors could strike it rich

Managing Partner, Albert Wenger told CNBC that his firm was investing in the “foundational plumbing” of the industry. He also added that he believes it is not completely crazy to consider that investors could strike it rich should they invest in the right project.

“Investors are rationally pouring a lot of money into this sector because I think people are seeing the winning blockchain here might be worth a trillion, or a couple of trillion dollars. It’s not at all crazy to think that.”

He added:

“Certainly, for any one particular project, there’s an extremely high chance it won’t work. As a result, if it works, the rewards will be very high.”

$330 million cryptocurrency fund

Wegner’s firm is the main competition for Andreessen Horowitz’s Silicon Valley Venture Capital (VC) firm who recently announced that they were launching $330 million in a cryptocurrency fund. The fund will focus primarily on the non-speculative use cases of blockchain technology.

When it comes to investing in crypto and blockchain, Wegner doesn’t think that Bitcoin is the way to go. Rather than placing all bets on BTC, he advises an approach of cautious diversification that is able to yield the best results. He explained:

“I don’t think you should be in the space and say ‘I’m only going to hold bitcoin.’ At the moment, this whole space is a high-risk space, and I don’t think anybody should be investing all of their life savings.” He added: “The stuff that actually works will float to the top. It might take a while, but time will tell.”

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$1 Trillion of VC investments to become liquid through tokenisation

Categories Cryptocurrency, ICOs, Tokenomics, Tokens, Investment, Cryptoeconomics, Venture Capital

$1 Trillion of VC investments to become liquid through tokenisation

Institutional and large capital investors are increasingly looking at the crypto market as a way of finding new investment opportunities, as well as solving issues they are facing in traditional markets.

Take venture funds for example; investors have to commit their investments to sit in a startup for between 3-7 years, and an estimated $1 trillion is currently held in such a manner, with no room for movement. This results in a situation where profitability is reduced as well as the overall efficiency of their holding. Of course, if the project is successful, the investor is set to receive excess profit but there is never a guarantee of the project meeting the yield expectations, let alone getting back the funds that were invested in it.

Venture capitalists are always treading a fine line because if the project fails they lose everything they invested, but just the fact that they are investing for long periods of time means that they miss out on other opportunities to generate revenue.

A study was conducted by Cambridge Associates that looked at the performance of 27,000 venture startups over the last 20 years. It was found that the amount of venture projects that returned less or the actual amount of invested capital never exceeded 60%. So let us consider that out of the $1 trillion of investments, 60% will return the amount invested in seven years, this could take $600 billion away from the global economy.

The tokenisation of venture projects could offer a solution to issues surrounding liquidity, as well as reducing the risk of investors and making VC assets more attractive. Security tokens can offer investors a range of financial right such as dividends, equity, a share in profits, voting rights, and buy-back rights. These transactions can be completed over the blockchain and crypto investors would be able to gain access via depositories or wallets that are registered in a decentralised ledger.

This development of tokenised venture assets is already well under way and one company, VNX Exchange in collaboration with ADDCAPITAL are planning to issue tokens for $20 to finance venture products. They will also be used to create high yield projects, allow early venture capital withdrawal, and greatly expand the range of qualified venture investors that have the possibility of investing.

It is believed that such new dynamics would have an extremely positive impact on the development of startups, change the culture of investing and fundraising for entrepreneurs, and significantly boost the global economy.

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How crypto will run the venture capital show in the near future

Categories Blockchain, Cryptocurrency, ICOs, Tokens, Utility Tokens, Security Tokens, Ethereum, Exchanges, Venture Capital

How crypto will run the venture capital show in the near future

A future is being predicted by global venture capitalists is a future that will be run by cryptocurrencies and tokens. This future, however, needs a lot of work done before it can be truly realised. Regulations must be put in place, lines must be drawn, and steps must be taken to ensure that both coins and tokens are not categorised as securities.

Andreessen Horowitz, a venture capital firm is taking a leading position when it comes to spearheading these efforts. They have already formed a collaborative group consisting of lawyers and investors which has met with the SEC earlier in the year. If cryptocurrencies are going to be treated in the same way as securities it could significantly affect their value and this is something that must not happen. This group of stakeholders included Union Square Ventures and representatives from legal firms such as Perkins Coie, McDermott Will & Emery and Cooley along with Andreessen Horowitz, and its main goal is to create a crypto-investment fund.

The search for a safe harbour

The New York Times reported that regulators are looking for a “safe harbour” for some cryptocurrencies.

“We are seeing a watershed moment in which many firms in the digital asset community who may have been ignorant of the law — or poorly informed — are now coming to terms with the fact that they are subject to regulators,” lawyer Richard Levin claims.

Various entrepreneurs that have been involved in ICO processes have stated that as cryptocurrencies and tokens are being used as a means of payment, they should not be categorised as a security. The Chairman of the SEC, Jay Clayton believes the opposite to be right and states that every token must be registered as such.

If a cryptocurrency is to be treated as a security, there will be considerable paperwork involved and they will only be able to be traded on regulated exchanges. Bitcoins are produced on a daily basis and are not sourced from ICOs, unlike Ethereum which is solely responsible for all Ethers produced as a virtual currency. Lawyers from Andreessen Horowitz want Ethereum to be considered in the same way that Bitcoin is as the former has now been decentralised.

Union Square Ventures partner and venture capitalist, Fred Wilson has described the situation as a clear indication that crypto and tokens are still not fully understood. On the other side of the coin, the Coinbase CTO Balaji S. Srinivasan has noted that leaders such as Christine Lagarde and Larry Summers admit that these currencies deserve some merit and recognition.

The value of the token economy

This is where a staunch critic of Bitcoin, Warren Buffet just doesn’t get it. Wilson further explains that the value of the token economy lies on the token itself and not on the cash flow. Srinivasan envisages a future where entrepreneurs can create their own currencies:

“Blockchain is turning everybody into a venture capitalist. The internet will become the world’s biggest stock market. Where basically anyone in the world can put…money into crypto,” he added.

The safe harbour that is so sought after by lawyers would consist of three things: regulatory certainty, tokens not being categorised as a security, and clear ICO regulations in the future. Under the proposals, a token would only be able to be considered as a security if it meets some of the following criteria: a limitation of promotion, mandatory disclosure, detailed sales terms, token supply, and no equity rights involved.

 

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