Initially ignored or even mocked by traditional investors, fundraising using blockchain is now a very serious track for venture capital companies. Regulators, for their part, remain silent for the moment.
If regulators still refuse to take a position on ICO (Initial Coin Offering), venture capital companies seem quite ready to convert to this new religion. This is what came out of a breakfast conference organized on Monday by the Luxembourg private equity and venture capital association (LPEA).
These 2.0 fundraisers, linked to blockchain technology and virtual currencies, are attracting growing interest in the sector. Maybe simply because it is now impossible to do without them. Nearly $4.5 billion (€3.6 billion) were raised last year by this method. In early January, the Russian mail Telegram announced want to raise between 2.5 and 4 billion euros in 2018 to finance the development of a new cryptocurrency. And all without going through venture capital companies.
Involved, but not directly
There is no question of missing the train for venture capitalists, who are now ready to adapt their method to jump into the water. “The blockchain offers many opportunities for our business, especially in terms of securing,” says Tom McNerney, partner at True Global Ventures. “This is a new tool, a change of mechanism for funding and not just for companies that have blockchain projects.”
A statement shared by Alexander Tkachenko, 2be.lu Investments. “It’s a chance for venture capitalists, but also for the industry in general, because ICOs provide liquidity by opening the investment to an audience that may not have had access to it until now.” It is not a question of exposing yourself directly. If True Global Ventures and 2be.lu Investments are already involved in this type of fundraising, it is through the companies they own in their portfolio, which have launched their own ICO.
“We are thinking about creating an investment fund specifically based on ICOs, but nothing is done yet. We still have to talk about it with all the partners,” says Tom McNerney.
Debuted at the G20
“ICOs are not going to replace traditional fundraisers, they are just going to reach a new audience, because they are more suited to small sums invested by a lot of people,” said Michael Jackson, a partner at Luxembourg venture capital Mangrove Capital Partners.
The motto is not to give in to drunkenness, even though regulators are slow to position themselves on the issue. Last Friday, the Swiss Financial Market Authority (Finma) acknowledged “the innovation potential of this technology” and published guidelines to better regulate ICOs in existing legislation.
A first in Europe, while France and Germany are currently under discussion to define a common position on the issue. The two countries have asked that the subject be debated at the next G20, which will take place in Argentina at the end of the year.
To be careful
In Luxembourg, the CSSF, which is very open to new technologies, remains silent for the moment. Discussions with actors in the square are underway, but nothing filters.
The current lack of a legal framework does not mean we can do anything. “The regulator will always be able to go back to an ICO in the future and react or even cancel it, if he believes that there are inconsistencies,” says Yannick Arbaut, advisor at Allen & Overy. “It is therefore very important to pay close attention to what we are doing today.”
Full of promise, the ICO still have many unknowns. What is certain is that none has been launched from Luxembourg. “No one has yet dared”, fun Marco Houwen, the head of the initiative Infrachain. Will the ICOs find their apostle in Luxembourg?
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