The Stack Archive Feature

Why blockchain evolution is set to transform venture capital

Wed 14 Feb 2018 | Baroness Michelle Mone OBE

VC Blockchain

Baroness Michelle Mone OBE, co-founder of crypto-powered investment platform EQUI, speaks around the potential impact of blockchain in venture capital 

Venture Capital (VC) has traditionally been the preserve of institutions and high net worth individuals. It’s a part of the investment market that has restricted access to exciting high-growth tech start-ups.

It is usually only after the start-up has gained immense success and moved towards an IPO that a wider audience hear about it and get the chance to invest in it.

On the other side of the coin, companies seeking funding are often forced to seek traditional VC funding methods first. This can be a lengthy process for these companies, consuming time that could be better spent improving their product or services, instead of pitching to a select number of people.

The independent government review ‘Be The Boss’ found that two of the biggest problems stopping start-ups from prospering were securing capital and the lack of mentors.

With modern technology, this doesn’t have to be the case. Crowdfunding showed everyone the way by allowing people to back start-ups at an early stage. Now with blockchain technology, we can create a token, but importantly a token that has real utility value.

The barrier to entry has remained high for anyone looking to invest in start-up and early-stage companies

The value of an EQUItoken is underpinned by the performance of the underlying investment portfolio. The direct correlation between investment and token allows individuals to adopt three strategies; they can trade the token on exchanges, hold it, or reap premium rewards by using it to invest in the opportunities that EQUI supports.

Through this model, companies can also gain access to funding from a wider audience than before. This means they are no longer restricted to the relatively small number of investment channels currently available.

Why blockchain?

Hardly a day goes by without a fresh announcement about how financial organisations are seeking to leverage blockchain technology to transform huge chunks of their business. Banks in particular are currently racing to harness the power of the blockchain, in a belief that it could cut up to $20 billion (approx £14.4 billion) in operating costs and transform the way the industry works.

In the face of this change, the investment sector has remained rather insulated, outside of the rising popularity of ICOs at least. The barrier to entry has remained high for anyone looking to invest in start-up and early-stage companies.

Put simply, EQUI is the unification of a new cryptocurrency with an innovative investment platform. Launched as a token and built using the established Ethereum blockchain, the underlying technology ensures an immutable record of transactions. It injects much-needed trust into the underlying investment process which will go a long way to attracting new investors.

Break from the mould

Blockchain is a disruptive force in many industries and it’s quite polarising – it has its backers and its critics. For the venture capitalist sector, the harshest of critics are likely to be among those who are already in the industry, as the chance to invest in high growth start-ups will no longer lie exclusively with them.

Blockchain will soon tip over into the mainstream – it has come such a long way in recent months

Alternatively, it’s possible that there will be some resistance from traditional financial institutions, as they are wary about embracing new technologies and cryptocurrencies. As blockchain and crypto become increasingly mainstream, these financial institutions will find the need to adopt or risk losing out.

For those outside the industry, it’s a really exciting opportunity to open up investments to a new stream of potential investors. I expect the blockchain innovation to be embraced by the majority.

What’s in store

While the technology itself is not even ten years old yet, blockchain has already made such an impact. The next ten years will see it realise its potential in many different sectors.

Blockchain will soon tip over into the mainstream – it has come such a long way in recent months. What will come next is the regulation and governments will start looking at it seriously, at which point it has the potential to kick off a technology and businesses revolution on par with the inception of the internet.

Companies like EQUI will open up venture capital and transform the sector. It will allow early stage tech companies to secure investment from a much wider audience.

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