Neufund, a German start-up company, has managed to raise €2 million ($2.13 million) in a seed funding round for its blockchain-based platform from Atlantic Labs, Klaas Kersting and a number of undisclosed angel investors. The new funding vehicle, while still in development, would enable investing in startups private equity using cryptocurrencies, causing a shift in how companies are funded.
The Berlin-based firm will use the fresh funding to allow blockchain-dependent startups to raise funds directly from investors through initial coin offerings (ICOs). In return, investors will get tradable crypto tokens which can then be traded freely on cryptocurrency exchanges. They are so far limited to the blockchain networks.
Moving forward, the platform will act as a new form of fundraising, somewhere between crowdfunding and VCs investment, which will be used by blockchain start-ups to fund their projects through the sale of crypto-tokens to investors. According to Neufund, blockchain startups have been given much more than $250 million in funding through ICOs.
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Bridge Cryptocurrency, Private Equity and Venture Capital
Explaining the core of their innovation, Zoe Adamovicz, CEO and co-founder at Neufund, said: “In venture capital, both startups and investors have an almost illiquid asset position – transaction costs in and out of a company are very high. Neufund offers a legal and a technical solution to bridge company shares and blockchain-based tokens. This is completely new because it allows tokens to not only represent ownership in a blockchain network but also equity in off-chain companies.”
“The transaction costs for issuing and managing such tokens are close to zero, investors can buy and trade equity in private companies and it makes essentially illiquid assets immediately liquid,” he added.
Within the new platform, investors and startup owners can trade around tokens issued by the startups themselves according to their needs. This creates a new type of ownership that is neither money nor stock, but tokens which represent equity and at the same time are as liquid as a currency.
ICOs are different from IPOs because they take place before a company has any real offering, and they’re different from traditional crowdfunding because rather than being a donation, they give participants a stake in their respective companies and a right to vote on decisions and actions taken in the future.