Blockchain technology is an opportunity to change the way we see illiquid assets of ownership including venture capital, with implications for all of the stakeholders involved, according to a discussion moderated by Global Corporate Venturing editor-in-chief James Mawson.
Mawson chaired a panel made up of 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. Secondly, we also want a more efficient onboarding process for the investors and we want to have access to more retail investor types.
“Of course, we know very well that once you go retail, the regulators will hit your 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 is it can avoid spooking entrepreneurs who perhaps remain sceptical on 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. And as such 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 only a single limited partner for its BlueOcean Ventures II fund which effectively collates disparate contributions from its crypto investors.
In contrast, Spice Venture Capital has built its entire fund around blockchain technology. Its team had aspired 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.”
At the heart of Spice’s strategy is the desire to introduce a digital mode for securing ownership of value, Ben David said, an objective that fundamentally differs from the currency speculation fueling crypto products such as bitcoin.
“We are using blockchain to replace analogue securities,” he added. “Whereas crypto is about making new kinds of money, what we are focused on is a very mathematic 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.”