Read the original CoinTime article here.
Venture investment is one of the modern myths that everyone longs for. There are reasons why people call it myths: Venture investment requires of significant market expertise and high entry tickets, which has high risk and low successful ratio.
With so many startups popping up everyday, choosing one to invest in can be tricky. In the UK alone, over 50,000 companies launch every month, while in the US it’s more like half a million. Everyone wants to spot the new Facebook or Uber, but few succeed.
On the other hand, VC companies have to deal with their own problems. Normally it takes an average of 10-12 years for a VC fund to return capital to their investors. Individual investments rarely allow to exit before 5-7 years.In order to invest individually one should expect to commit $100k+ per single investment and bare a high diversification risk. Investing into a VC fund requires at least $1mn in capital and for most “outsiders” it is nearly impossible to get in.
Alexander Tkachenko, the founder and CEO of VNX Exchange, sees the problem and started VNX Exchange. Recently the partner of Jinse Finance, COO of CoinTime Angela Tong interviewed Alexander at Blockshow Conference in Singapore.
An Unique Exchange
Alexander told CoinTime, “The main problem of the VC market or the main issue of VC market is that although VC investments can generate very potentially high returns but be illiquid for many years.”
Therefore, he believes that liquidity is a barrier to a higher allocation of the capital amount which has been deployed in VC and accelerator space. For the start-ups, VC plays an important role. More liquidity of VC means more people thinking about starting up a company will be able to get access to the VC deals, and they will be more able to access the accelerator space. The exact idea behind VNX is that through the platform, VC funds and accelerators can get liquidity for their investments, according to Alexander.
What distinguishes VNX from other exchanges is that VNX only deals with VC funds and accelerators. The product of VNX is a VC fund portfolio which will be put on the market and be traded.“All VC funds and portfolios which are coming to the (VNX) platform will have to have a legal opinion from a reputable law firm. The legal opinion will be confirming that those VC funds own the portfolio or stakes in the companies. Then the VC funds and portfolios will have to have a legal confirmation of the net asset value from a reputable evaluator. The confirmation will show that there is certain value in the portfolio. So, we are really trying to protect investors who will be dealing on the platform.” Alexander said.
Regulatory Compliance and Security
Being the first completely regulatory digital asset marketplace in Europe, VNX sees the importance of regulation.
“We understand that in order to attract serious and traditional investors, the platform must be 100% regulatory complied. First, the big money is only going to the projects which are 100% in line with regulation. Second, security is important.”
To achieve the goal, VNX works with one of the largest law firms in Luxembourg called Elvinger Hoss. Moreover, their license application is supported by the team led by Luc Frieden who is a former finance minister of Luxembourg, and applied license to the regulator in Luxembourg—CSSF.
“Traditional investors of course will only go where they see potential return. Those investors can make their judgements about business risk. In conclusion, regulatory compliance and security of the platform are two pillars which we are focusing very much on. That is why we are working with the big-four large law firms. We are working very hard with the regulator from the very beginning because we are setting up fully complied platform,” Alexander said.
Also, VNX is working with the university of Luxembourg, which is one of their large partners providing security for the platform. Right now, there are 4 to 5 people from the “SnT” team of University of Luxembourg is helping VNX to analyze different blockchains which could be useful for the platform. They will also provide security testing and standards for the platform, according to Alexander.
“‘SnT’ will be specifically providing analysis of different blockchains which we are going to use. They are helping us in the development of the platform, and specifically, they will be helping us from the security aspect of platform development. I think the benefits for both sides are tremendous; we are getting access to some of the best people in the blockchain space of Luxembourg and European Union. These people will be helping with one of the key aspects of our platform and cyber security. This kind of cooperation is also important for the University of Luxembourg,” said Alexander.
Connecting Two Markets
With cryptocurrency market marching in, how does traditional financial market see it? Alexander thinks that traditional financial markets are experimenting with digital assets at the moment, they view the digital asset cautiously. He explained it more specifically.
“ Security is obviously something paramount to the traditional finance, therefore, I think the traditional finance is experimenting with what has been there. The arrival of platforms like ours would be compatible with traditional finance like Bloomberg…These players are only interested to work when it is secured and 100% complied. There are different things which are required for them, I think the current situation in the digital asset market is still not good for those traditional players to deploy big money.”
He also thinks that it is possible to use the experience of traditional financial markets for the digital currency markets. There are certain aspects such as security that need to be addressed for the transactions specifically.
Also he believes that STOs really need to address a very clear problem in the real world if they want to succeed. For example, there is no issue with the liquidity of the shares of Coca-Cola, therefore, tokenizing the shares of the Coca-Cola does not solve any issue with the liquidity. Investors can buy the shares through a bank or broker etc. Apart from the regulatory and security compliance points of the view, STO also need to solve real world’s existing problem.
For future, VNX chooses Singapore, Hong Kong and Korea to expand its business in Asia. Alexander told CoinTime, VNX as a marketplace connects indenture providers and liquidity providers, among which, indenture providers are VC funds and accelerators; the liquidity provider would be traditional funds, it also could be individual and qualified investors. Right now, transactions on the platform will be in Euro. Therefore, the use of the cryptocurrencies is regarded as one of the ways to fund accounts on VNX.
We understand that in order to attract serious and traditional investors, the platform must be 100% regulatory complied. First, the big money is only going to the projects which are 100% in line with regulation. Second, security is important.
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