Blockchain Capital has raised a record-breaking $10 million in six hours with its Initial Coin Offering (ICO) for BCAP tokens. The token sale is now closed. With BCAP, Blockchain Capital wants to start “democratizing” the Venture Capital industry, but this is only a beginning and there are challenges ahead.
“These thought leaders and investors have made Blockchain Capital’s pursuit of the first liquidity-enhanced venture capital fund a reality,” said Blockchain Capital managing partner Brock Pierce commenting on the many high-profile players in the digital economy world who joined the ICO. “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, tradable, digital token that still abide by all regulatory compliance rules.”
BCAP Tokens, which will be tradable on leading cryptocurrency exchanges, are Ethereum-based smart contract digital tokens representing an indirect fractional non-voting economic interest in Blockchain Capital’s Digital Liquid Venture Fund. According to the company, The Fund will disrupt the traditional VC market and create the first of its kind “Digital LP” investment vehicle.
“There are few to none legitimate ‘blockchain’ companies trading in the public markets, and most non-institutional investors can’t get access to early funding rounds – directly or through a major venture fund,” notes Blockchain Capital., mentioning their past winning investments in the likes of Abra, Ripple, and Kraken. “We wanted to change that and allow the community in. Welcome to democratized venture capital – welcome to investing in what you believe in.”
Blockchain Capital, launched in 2013 and headquartered in San Francisco, is a sector specific, multi-stage, venture capital firm that seeks to gain diverse exposure to the blockchain ecosystem.
“Blockchain Capital is revolutionizing venture investing by unlocking liquidity in previously illiquid secondary venture markets by tokenizing assets via Ethereum,” said Andrew Keys, Head of Global Business Development at Consensys.
“Capital markets will be forever changed by this type of financial instrument innovation.”
Pierce, a venture capitalist and entrepreneur who is also the current Chairman of the Bitcoin Foundation, is persuaded that the initiative has a potential to disrupt the venture capital industry – “the illiquid, insider-only venture capital market.” Pierce said:
“Together we expect to democratize the venture capital industry and provide a unique product to the broader crypto investment community.”
However, the Blockchain Capital ICO was open only to selected accredited investors in the US, a very small fraction of the potential target market. In an interview with CoinDesk, Pierce acknowledged that, to reach the full potential of the crypto securities model, next-generation initiatives will have to find ways to legally open up securitized tokens to non-accredited investors. “That’s the only one other nuance that you can bolt on,” said Pierce. “The trade-offs are more cost [and] a greater degree of disclosure, but the benefit is non-accredited investors. It allows you to make a true retail offering to the world.”
Less than ten percent of households in the US are wealthy enough to qualify as “accredited investors,” and there are other strict requirements as well. That doesn’t seem good enough to really democratize venture capital, and more disruptive security investment models like DAOs and DACs come to mind.
Image from Wikimedia Commons.