A venture capital firm called Blockchain Capital has done something that could change the way companies get funded—and perhaps even the way they operate. Instead of an Initial Public Offering, in which a company sells stock via a regulated exchange like Nasdaq, Blockchain Capital raised its third fund partly by issuing its own digital tokens called BCAP. Anyone who bought the token bought into the fund.
Known as an initial coin offering, or ICO, this fundraising method is becoming increasingly popular. In 2016, dozens of startups and projects used ICOs to raise a total of $236 million, according to a recent study by CoinDesk. Despite this, the method has apparently never been used in the traditional world of Silicon Valley venture capital.
Democratizing Venture Capitalism.
The BCAP token provided the investor base across the globe with the opportunity to invest into a leading venture fund. Traditionally, venture fund investment has been restricted to an elite class of investors, including wealthy university endowments and politically connected unions and pension funds.
During the ICO, average investors who wanted to diversify and get exposure to the surging growth in blockchain startups were allowed to purchase BCAP tokens representing digital interests in the Blockchain Capital III VC fund, using bitcoin, ether or U.S. dollars.
Liquidity.
The biggest problem with venture capital, is that it delivers fantastic returns but no one wants to invest in an asset that’s locked up for 5-10 years. Through the BCAP tokens, liquidity barriers are overcome since these tokens can now be bought and sold on secondary markets via established digital currency exchanges.
Issuing under Regulation D: a security exempt from registration.
Blockchain Capital is unique in offering tokens they clearly stated are securities and they launched them within existing regulatory requirements. Briefly, the SEC does permit the sale to US residents of a security that is exempt from registration requirement if it satisfies two conditions.
One of them is that the sale is only open to accredited investors-US residents with a net worth greater than $1 million or with at least a $250,000 income-and that there is a 1-year lock-up on the tokens sold to US investors. International users will have a 40-day lock-up period before selling to US investors.
Any US residents interested in participating in the sale will need to submit documents to verify both their identity and their status as an accredited investor. Overseas investors did not have to meet an income or net worth requirement but they had to submit documents to have their identities and net worth or income verified.
BCAP (BCAP)Overview.
Current coin Value: $1.51 (+18.23%).
Market Cap: $12,781,300.
24hr volume: $183,330.
Circulating Supply: 10,000,000 BCAP. (All sold in the ICO).
(As of 29/8/2017)
BCAP Tokens are Ethereum-based smart contract digital tokens which grant holders a portion of the profits earned by the fund. The fund’s managing partners collect a 2.5% management fee (based on total assets under management) and a 25% performance fee (fee on returns). The remainder of profits is distributed to token holders.
The BCAP tokens are fully transferable and tradable on leading cryptocurrency exchanges. Meanwhile, A token buyback provision will also enable Blockchain Capital to purchase open-market tokens in the event that their market value falls below their net asset value.
BCAP Token holders also get transparency through the so called regular portfolio valuation updates.
ICO.
BCAP Tokens were sold with a face value equal to $1 and capped at a maximum of 10 million tokens. The offering began on 10th April, with the firm utilizing the TokenHub platform developed by Argon Group, which also acted as the offering’s underwriter. The token sale is now closed.
What will the funds be used for?
The $10 million digital token offering was part of a traditional $50 million offering for the firm’s third fund called Blockchain Capital III: a combination of a traditional limited partnership and the BCAP digital token.
The funds will be split 50/50 between new ventures and a reserve account used for follow-up investments. The fund will invest in 10–20 companies or token-based projects, contributing $500,000 per deal.
Exchanges.
- Allcoin.
- Liqui.
- Lykke.
- EtherDelta.
Wallets.
Jaxx wallet.
Jaxx is a multi-chain, multi-platform wallet that allows the management and trading of many popular digital blockchain assets.
Steps to get your Jaxx destination address:
1) On Jaxx Chrome or Extension versions activate your BCAP wallet via MENU > WALLETS > (ENABLE) BCAP
2) Scroll to BCAP (BCP) via the carousel on the main screen.
3) Copy your BCAP public address.
About Blockchain Capital.
Blockchain Capital, launched in 2013 and headquartered in San Francisco, is a sector specific, multi-stage, venture capital firm that invests in the best entrepreneurs who are fostering innovation in the Blockchain economy. Their first fund was launched in the fall of 2013. Since then, the fund has made investments in forty-two companies at varying stages of development.
Blockchain Capital was co-founded by Bart Stephens, Brock Pierce, and Brand Stephens who also act as the fund’s managing partners. Together they have more than six decades of investment management and entrepreneurial experience. Brock Pierce is the Chairman of the Bitcoin Foundation and an early digital currency entrepreneur. Brock serves on the founding board of multiple blockchain start-ups including the omni foundation, GoCoin, and Tether among others.
Blockchain Capital has built an unrivaled network of entrepreneurs, advisors, and limited partners who are on the front lines of this fast moving sector of Fintech. The principals of the firm believe that Blockchain technology is a profound invention that offers a better, faster, cheaper way to move money and exchange assets without counterparty risk.
Who are the project’s competitors?
Two projects are attempting to collateralize shares in a private equity fund: ICONOMI and Taas.
In 2016 ICONOMI raised more than $10 million in their token sale to launch a platform for managing funds on a blockchain. Some of these funds were earmarked for an actively managed investment fund focused exclusively on ICOs. Profits are distributed using a recently announced buyback scheme. Their token sale was open to anyone and did not reference securities law in any substantial way, though in recent posts, they have clarified they are not offering ICONOMI services to US residents at this time. In this legal FAQ, they also express the viewpoint that ICONOMI does not fit within traditional regulatory frameworks–a quite different philosophy from what Brock and Blockchain Capital have taken in their sale.
Taas, a hedge-fund focused on trading cryptocurrencies, also raised funds in a similar manner. They closed their sale to US persons, though the legal status of their tokens is unclear.
In closing.
Blockchain Capital’s successful offering means more venture firms are likely to use digital tokens in their future fundraisings. Bart Stephens says his firm has already been approached by prominent venture firms wanting to know more about the firm’s offering through digital tokens. Blockchain Capital may set up a separate company to help other venture firms raise capital through digital tokens.
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