The runaway success of ICOs proved just how eager people were to invest in crypto-focused startups. So it was only natural that dedicated investment platforms and asset managers would spring up. Some of these, like Grayscale, are geared towards wealthy investors, while others are pitched at regular folk who just want to put their money to good use.
Investment Platforms
Investment platforms offer a means by which investors can gain exposure to crypto companies as a shareholder, rather than simply holding a native cryptocurrency, and benefit from the success of the underlying business. This can make them more appealing to investors who prefer traditional to see a pitch deck and hard financial data, rather than a whitepaper and address to send Ethereum.
They mirror the growth in general Crowdfunding platforms like Kickstarter, though aren’t positioned for very small investors. Investors must fit specific criteria that ensure they are sophisticated enough to understand how investing works and/or have the net worth to do this safely.
BnkToTheFuture is one example. To date, over $880 million has been invested by its users in crypto and fintech related projects including Kraken, Bitstamp and Bitfinex, all producing significant returns for early investors, though this doesn’t mean every investment will be a success.
With BnkToTheFuture (and platforms like it), investors’ funds are held in escrow, independent from the company and provisioned for investment in a pitch once it reaches its minimum funding goal. A range of payment methods are supported, and bank-grade security procedures (socket layers, 2FA) ensure investor confidence.
As with any investment, there are significant risks and drawbacks:
- A return on investment will only be reached by private sale or public listing
- The company could fold before that happens, meaning you lose your investment
- Holding SPV shares doesn’t give you voting rights
By investing, individuals are able to become an indirect shareholder in the startup or fund via a Special Purpose Vehicle (SPV) that holds their investment. Though the share of the SPV is essentially locked until the company is bought or publicly floated, there is a secondary market for the shares giving you an option to sell or, if you missed the investment period, buy-in.
Leave a Reply