Venture capital disrupted: How the blockchain has altered fundraising
I live in the Bay Area/Silicon Valley, a region known for its entrepreneurial spirit and breakneck pace of innovation. Here, speed and scale are required, technology disruption is the norm, and business models need to constantly evolve in order to stay relevant. Yet, interestingly, the venture capital process that feeds this engine of innovation has remained unchanged for many decades. Despite advancing technologies and a global economy, venture capital and its lucrative returns remain the purview of a handful of elite VCs and their respective networks.
If our job as VCs is to facilitate innovation, why don’t we innovate ourselves to bring equal access? How can we make the process better, more efficient, and effective? I believe today’s blockchain technology and security token offerings (STO) provide an innovative means to do so. After all, we see it in the headlines daily: the blockchain is disrupting the financial services and fintech industry, and completely altering the very face of venture capital as we know it.
Blockchain’s decentralization model disintermediates “the middleman,” enabling money to be raised directly, peer-to-peer, from the public markets. The rise of the STO/ICO (initial coin offering) is now the equivalent of venture capital fundraising plus IPO, and now, suddenly, the VC industry is turned on its head.
This is the massive disruption Andra Capital sees on the horizon and the reason we have launched the Silicon Valley Coin (SVC). It’s the first asset-backed, tokenized fund that provides permitted investors from all over the world access to the best pre-IPO technology companies in Silicon Valley—and beyond. With this groundbreaking endeavor, we have created a tokenized fund and launched a blockchain-based startup that we believe will radically transform the nature of the venture capital business. Our asset-backed, security token is tradeable and backed by a high-performing, half-trillion dollar asset class.
The venture capital business is not an open system. Investors want access to deals, yet the first-tier of institutional investors dominate the deal-flow and profits. Some funds haven’t opened up to new investors in more than a decade. Ordinary and foreign investors have little to no access, and those who do have access to private shares generally face a long waiting period of 7-10 years on those assets.
With our SVC, we are leveraging blockchain technology to create an innovative solution that solves these important problems for fund managers and investors. It enables us to democratize pre-IPO investing, providing global investor access to late-stage, hyper-growth technology firms.
Just like the advent of the internet in the ‘90s, we can now freely access information to anything, without constraint. Careers that used to require years-long apprenticeships are now learned all over the web. This democratization of information has had a domino effect on every industry sector.
The asset-backed, security token is revolutionary. If this new form of financial investing achieves a sliver of the level of freedom and access that the internet ignited, that impact could be enormous. Competition always benefits consumers, and bringing transparency and competition to venture capital will likewise benefit investors.
We are doing this with an exceptional, diverse team of entrepreneurs and investment banking experts with deep ties in the Valley, rich coverage, and experience in international markets. In addition to critical know-how, our entrepreneurial and international roots provide empathy, connection, and understanding. We are more than just investors looking at financial statements through the lens of dollar signs. Having sat on the other side of the boardroom, our team understands the daily struggles, aspirations, and creative passions that drive entrepreneurs; we can actually help solve problems.
I recall a compelling story that Hermann Liu, one of Andra Capital’s Managing Partners, recounted to me back when he was working at Charles Schwab. The then-startup set out to disrupt the brokerage field. At the time, stock trading involved brokers and big checks. Schwab recognized how a different approach, coupled with nascent technology, allowed them to open the floodgates and give ordinary investors an affordable way to invest. Charles Schwab started a discount brokerage that would grow to serve the mass market, regardless of how much money an individual had to invest.
Schwab was operating like an early-stage startup amidst New York City financial firms that did things the way they always did. Similarly, Andra is using the blockchain to disrupt the status quo of traditional venture capital and democratize VC investing. Our vision is to make venture capital transparent, faster, and more innovative while bringing unprecedented access to permitted global investors. And we are going to do this with the best asset class available in Silicon Valley.