The debate featured Thomas Zehnder, general partner at medical technology and life sciences-focused venture capital firm BlueOcean Ventures, and Ami Ben David, co-founder and managing partner of tokenised fund manager Spice Venture Capital.
BlueOcean Ventures has opted to build a security token offering (STO) platform to facilitate crypto-investments into its second medtech-orientated venture fund, BlueOcean Ventures II, with the aim of improving VC liquidity while luring more retail investors to the table.
Zehnder said: “We want to create liquidity in this highly attractive but at present completely illiquid asset class that is venture capital. Second, we also want a more efficient onboarding process for the investors and we want to have access to more retail investor types. We know very well that once you go retail, the regulators will hit you hard, especially in the area of tokenisation. It is a field where [regulation] is moving everywhere and, depending on the jurisdiction, you are at a different stage.”
One benefit of BlueOcean’s platform was that it could avoid spooking entrepreneurs who were sceptical about the functionality of digital assets. Zehnder argued: “Our portfolio companies do not see any change. All the money is coming in tokenised through the platform, and on the day it arrives it gets converted into Swiss francs. It is Swiss francs we invest into our portfolio companies. The day we have an exit, the proceeds are returned.”
BlueOcean’s STO platform functions as the single limited partner in its BlueOcean Ventures II fund, which effectively collates disparate contributions from its crypto-investors. In contrast, Spice Venture Capital has built its fund around blockchain technology. Its team intended to see whether blockchain could reshape rigid concepts historically fundamental to VC, such as seven-year time horizons.
For Spice, a crucial advance was the creation of bespoke software that could automatically interpret regulations relevant to tokenised assets in each jurisdiction. Ben David said: “We quickly realised we had to go country by country and understand the regulation and then basically put all the rules into the software. Once we had done that it was easier. We then took the technology that we used to tokenise ourselves and actually used it to spin off our first portfolio companies to tokenise other funds.”
He said at the heart of Spice’s strategy was the desire to introduce a digital mode for securing ownership of value, an objective that differed fundamentally from the currency speculation fuelling crypto-products such as Bitcoin. “We are using blockchain to replace analogue securities,” he said. “Whereas crypto is about making new kinds of money, what we are focused on is a very mathematical way of securing ownership of value. The value of Bitcoin is digital but it is in the environment, but when we are talking about securities it is about the real world. There has to be a very strong tie between the token that is being moved and the digital world.”
Roberto Bonanzinga, co-founder and investment partner of venture capital firm InReach Ventures, talked about how AI technology could help corporate venturing units locate companies from obscure countries and scale their investment pipeline. He said AI could help corporate venturing firms improve their deal pipeline and unearth investments at scale.
He said the biggest asset a firm had was data, and not the amount of cash on hand. “I am surprised by how little people are talking about it because that is where corporate venturing should be leading in terms of innovation,” he said.
With venture capital firms and corporate venturing units investing in one deal out of about 1,000 they had considered, their job really came down to building “a funnel source” of those potential investments. He said InReach was proud ofhaving more software engineers than investors, using AI-based technology to source potential opportunities at scale.
He added: “We are trying to apply a software layer that supports all aspects of the value chain and portfolio management.” He went on to explain the challenges of deal-sourcing in Europe as an example. In order to find the right companies you had to have people working across different countries or time zones.
Through InReach’s mixture of machine learning and expertise, Bonanzinga claimed the firm could examine “a couple of thousand” companies a month. The staff did this by applying everything they had learned and the techniques they had gained to data. “It is not about hiring a data scientist to figure out the data,” he said. “This is about re-engineering the basic process of what it looks to invest in and re-engineering the industry’s approach.”
According to Bonanzinga, the technology allowed InReach Ventures to access a pipeline of investments at scale, but it had also helped reveal potential investments from fairly obscure parts of Europe, and he pointed to an investment in Lithuania-based retail importer Oberlo as an example. “These guys were trying to use drop-shipping between China and the US using Shopify,” he said.
In drop-shipping, the retailer does not keep goods in stock but instead transfers orders and shipment details to either the manufacturer, another retailer or a wholesaler, which then ships the goods directly to the customer.
“It was basically an app on Shopify. These guys had an enormous amount of traffic for such a small company, and after discovering them using the technology, we looked a little deeper and found out the founders were all drop-shipping experts. No one would have known this company exists without the AI tech.”
