The Blockchain Capital’s ICO may turn out to be a game changer in venture capital world. It connects two previously coexisting realities — equity investment and tokens issuance. With a competent team, an innovative venture fund concept, and a full compliance with existing regulatory framework, this token sale should definitely be taken seriously.
About
Blockchain Capital (BC), a venture capital investment firm, is raising its third fund called Digital Liquid Venture Fund (DLVF). The collected funds will be invested into startups and companies from the blockchain sector, into equity of the companies and potentially tokens. This ICO stands out of many as the token is offered under the US securities regulations.
Investor’s profile
The ICO is open to both individual and institutional investors who wish to support blockchain technology companies and/or cryptocurrencies, independent of their place of residence. At the same time, only accredited investors may participate in order to comply with the US law (see ICO section for more details).
What you get as token holder
• Level playing field for ordinary and institutional investors.
Ordinary investors will get exposure to large companies from BC’s portfolio, such as Kraken, Ripple, Abra, Coinbase and many others, that they otherwise may not have.
• Up to 20 new startups invested into by the Fund, with $500,000 as an average investment per company.
• Regular updates of portfolio valuation.
• No direct dividends, token holders will receive return on capital indirectly, via token buybacks (see Token Distribution section for more details).
• No voting rights.
Competitors
The DLVF is unique as it invests in blockchain companies that are incorporated and mainly focused on blockchain infrastructure — hard and soft one. At the same time it issues tradable tokens to its own investors.
In that aspect it could be comparable to Satoshi Fund, the first blockchain-based fund, that also issues tokens to its investors but invests exclusively in blockchain assets, buys tokens of blockshain systems and blockchain applications.
Team
Blockchain Capital was founded in 2013 by Bart Stephens, Bradford Stephens and Brock Pierce and has since invested into 43 blockchain technology projects, including Coinbase, Chain, Kraken, Xapo, Ripple, BTCC, Abra, Blockstream, Gem, BitGo among other. BC was the first venture fund to accept Bitcoin for capital contributions.
The investing team consists of 6 people, including the three founders. While Brad and Bart Stephens are not well-known beyond their BC activities, the other four have quite prominent backgrounds:
• Brock Pierce, BC Managing Partner, chairs the Bitcoin Foundation Board and is also known as the founder of the IMI Exchange.
• Spencer Bogart, BC Managing Director and research head since February 2017, is probably the most famous Wall Street analyst covering Bitcoin and Blockchain.
• Jeremy Gardner, BC entrepreneur in residence (EIR), is mostly known for his work at Augur project.
• JoAnne Lauer, BC Director of Operations, worked at Belvedere Capital and has a total of 25 years experience.
ICO
• ICO starts on April 10th at 6AM PDT and will end on May 10th.
• 10 million BCAP tokens are offered, priced $1 each; no more tokens will be created.
• BTC, ETH and USD are accepted.
• Tokens are issued on ERC20 smart contract.
• Only verified and accredited investors may participate; for registration, verification and investing visit TokenHub.com.
• In case of US residents, only investors with a net worth above $1 million or at least a $250,000 income may participate.
• In case of US residents, no more than 99 investors may participate, large orders will be therefore prioritized; the number of non-US investors is unlimited.
Potential investors should also consider the following:
• Only a small portion of the Fund is raised via an ICO. Next to $10m coming from the ICO, another $40m are collected via a traditional limited partner route.
• Issuance will be managed by a Blockchain Capital TokenHub Pte. Ltd. TokenHub is a subsidiary body of the Argon Group Holdings investment bank. After the ICO, it will get sole limited partnership interest in the Fund. The Fund’s general partner will be Blockchain Capital.
• Management fee charged by BC: 2,5% of net asset value per year.
• Performance fee charged by BC: 25% of the Fund’s realized capital gains.
• Lock-up periods apply when the tokens will be unavailable for trading on exchanges:
For tokens sold to US investors — 1 year after ICO.
For tokens sold to non-US investors — 40 days after ICO.
Token distribution
BCAP token has no distribution or dividend rights. Any return on capital to token holders will occur through open market purchases (1) or repurchases of BCAP tokens (2). If there are realizations in the Fund’s portfolio, the funds from them will be allocated as follows:
• At least 50% — to be re-invested into additional portfolio investments.
• The rest — to be distributed to token holders solely for use to repurchase BCAP (2).
Summary
The Blockchain Capital’s ICO creates a precedent that some may be happy about, while the others not. Their experience may be taken over by other venture investors. It may also increase external pressure on blockchain startups to hold their token sales within the legal framework.
A few “thought leaders” from the venture and crypto communities are already on the list of participating investors. While the need to go through the verification process and comply with the US legal regulations may discourage some potential supporters, larger investors will hardly have any problem with that. Especially given that their effort is compensated by extra security. Before investing into the fund, just make sure you have read the Offering Memorandum and do comply with the investor’s profile; and keep in mind the token will give you no direct dividends or voting rights in the Fund.
Useful links
The Offering Memorandum is available at TokenHub.com after registration; a short summary of funding terms can be found here.
For more details on the project check the Fund’s website, BitcoinTalk thread, or visit their profile at Cyber•Fund.
“Brock has a really huge expertise in blockchain and one of the best portfolios of blockchain infrastructure companies, — underlines Konstantin Lomashuk, CEO of Satoshi.Fund. — He makes a revolution launching the first blockchain-based hedge fund that instead of unliquid notes will offer liquid tokens”.
Satoshi•Fund — blockchain investment company. Invest only in blockchain assets since 2014.