Despite the massive growth of blockchain technology projects and associated cryptocurrencies, venture funding has primarily remained traditional. We’ve seen some examples of blockchain use within conventional VC firms, such as Spice VC, but otherwise, the industry hasn’t embrace tokenization.
To buck that trend, Andra Capital today announced the launch of its late-stage technology growth fund. The Andra Fund is tokenized and uses blockchain technology to enable broader access to investors around the globe.
“Leveraging blockchain technology is a very important part of our disruptive fund structure and business model,” managing partner Dr. Hermann Liu told me. “Our Silicon Valley Coin, based on blockchain technology, represents an ownership interest in the Andra Capital Fund. By being on the blockchain, Andra provides global investors access to the best technology companies in Silicon Valley — opportunities that are traditionally limited to affluent top-tier VCs in Silicon Valley, capable of writing significant check sizes.”
The company has already secured more than $500 million in investment commitments and is well on its way to raising $1 billion. Commitments have come from traditional investors (such as institutions, hedge funds, family offices, and individuals), as well as token holders.
Providing access to the fund via a token solves the liquidity issue.
“On the blockchain, we’re able to securitize traditional illiquid assets into tradable security tokens,” managing partner Haydar Haba told me. “Rather than issue paper certificates to our investors, ownership in our fund is unitized and digitized through seamless smart contracts, which are embedded with legal structures, regulatory requirements, and ownership transfer conditions. Investors benefit from the option to hold our asset-backed security token, Silicon Valley Coin, like a stock or trade it at its current market value without having to wait 10 years for liquidity, as with traditional VCs.”
Andra Capital is offering investment opportunities in its fund through its regulatory-compliant Silicon Valley Coin (SVC). SVC is open to permitted U.S. and global investors and gives each investor an ownership stake in the fund. SVC is a security token backed by real, legally registered securities in private, late-stage technology companies.
Many blockchain technology projects that have a security token are choosing to headquarter outside of the U.S. to limit regulation by the SEC, but that approach also restricts access to U.S. investors. Andra Capital is taking a different approach.
“We’re headquartered in San Francisco,” Liu said. “By strategic design, our fund is conservative and treated as a traditional security offering, so we remain compliant with U.S. regulatory requirements and are exempt from registration under Reg D requirements. The fund only accepts qualified investors in the U.S. and permitted investors globally. All investors are required to undergo KYC/AML and investor verification.”
Andra Capital is further protecting itself via strategic alignments.
“To assure professional management, oversight, and transparency, we’re working with world-class partners, such as DLA Piper as our legal counsel, Deloitte as the fund auditor, and Duff & Phelps as the fund compliance and valuation partner,” Liu said. “We’re committed, confident, and obligated to stay on the right side of regulation.”
So what types of startup will benefit from this fund, and how will the funds be allocated?
“The majority of the fund — 80 percent — will be invested in high-growth, late-stage technology companies, often with an exit (either an IPO or acquisition) on the horizon,” Haba said. “Our investment candidates are companies that are backed by top-tier VCs, leaders in the industry and entering hyper-growth mode. We generally participate after Series B. Our late-stage investment thesis aims to generate consistent returns with a mitigated exposure to risk. At the same time, we allocate 20 percent of the fund to early-stage companies that are in the area of our domain expertise. This early and late-stage mix gives investors a balanced strategy and risk-return profile.”
What’s next for SVC?
“We are currently in our private, pre-sale round and are officially announcing our impact-innovation fund today,” Liu said. “Our security token offering is set for Summer 2018, where our Silicon Valley Coin will be listed in several security exchanges. We hope to open access and connect global investors with opportunities in Silicon Valley — everyone can be a Silicon Valley investor no matter where in the world they live. In our mind, Silicon Valley is not just a geographic location; it is also a mentality.”