Younger generations should have a shot at affordably investing in the companies they’ve been explaining to their parents. Blockchain Brings Unicorns To Millennials
Why should only the wealthy get to ride unicorns to further riches?
Why Shouldn’t Millennials Get A Piece Of The Big Startups?
Privately held firms with at least $1 billion in value come with daunting price tags that freeze out ordinary investors. Banks that help unicorns raise money are glad to chalk up a few bulky subscriptions — $1 million and more — from top clients. It works fine with regulators who don’t want the general public to lose their life savings on risky bets.
Were the ticket, say, $1,000, even affluent millennials might want to take a punt on the next Facebook Inc. or Uber Technologies Inc. without having to wait for a stock market debut. That wait is only getting longer. A sizable chunk of $2.5 trillion of uncalled private equity — dry powder — is with venture capital funds that promising companies can use to delay going public and spread the wealth more evenly.
The status quo is unfair. Until its recent initial public offering, the moneyed folk who would never deign to set foot in an Airbnb Inc. property could buy in, whereas a younger, regular user could not. This gap in access could also be expensive. The “massive downward pressure on wages” that the International Labour Organization has forecast for the near term — particularly for women — could make it harder for millennials to build nest eggs if interest rates remain low for long.
But the existing setup lacks the technology to make private securities a mass-market product. “Private banks only show deals to clients with net worth above $50 million,” says Oi Yee Choo, chief commercial officer of iSTOX, a Singapore-based digital securities platform that aims to democratize finance by fractionalizing it.
It’s not the first player to do so. San Francisco-based Forge Global Inc. made available unlisted shares of Spotify Technology SA, Snap Inc. and Square Inc. to sovereign wealth funds, family offices and wealth managers. The Peter Thiel-backed firm is now expanding in Asia. The timing is right. Thanks to Airbnb and DoorDash Inc., venture-backed IPOs had a banner 2020, encouraging Asian unicorns to accelerate their own listing plans. The closer the offering, the greater the retail appetite.
Blockchain may offer a way to meet this demand. iSTOX, a startup that counts Singapore’s stock exchange and state investment firm among its investors, is turning securities into tokens on distributed ledgers. These aren’t public and permission-less like Bitcoin. iSTOX tokens have no value in the outside world.
Nevertheless, by using them, time-consuming manual processes can be automated via smart contracts — software code that self-executes when conditions are met. A three-day settlement cycle can be shortened to seconds. Bespoke investments can be resized as tiny parcels.
iSTOX, which is regulated by Singapore’s monetary authority, recently gave people access to the world’s first digitized unicorn fund for as little as $20,000. After securing $50 million in Series A funding this week from a couple of Japanese government-backed investors and others, the goal is to create an exchange that will let individuals “participate in the growth of large pre-IPO companies like Grab and TransferWise, for example,” Choo says. The technology can handle a ticket size as low as $500.
Grab Holdings Ltd., which began as a ride-hailing service in Southeast Asia, is now a financial services player with a Singapore digital bank license. U.K.-based TransferWise has found its niche in offering cheaper international money transfers than banks.
If early backers or employees of unicorns can cash out when they want, the benefit of their $1.4 trillion market value may reach more people.
Despite the lure of red-hot equities and the appeal of day trading platforms like Robinhood Markets Inc., the 25-to-40 age group in the U.S. has a slightly higher exposure to cash than older cohorts. The future of work and wages is under a cloud. If millennials’ average $83,000 retirement account balance doesn’t get a return boost, they’ll lag behind wealthier older generations.
In Asia, too, inequality is worsening in ways that will matter for both states and markets, according to Australia and New Zealand Banking Group Ltd. Unemployment is soaring among Indonesia’s less-educated workers, South Korea’s part-time labor force is facing a job crunch, and India’s real wages have cratered. To top it all, “the performance of financial assets is becoming a source of inequality,” ANZ analysts Sanjay Mathur and Dhiraj Nim say.
Before politicians reach for the hammer of taxation to tackle the inequality problem, they should use the mallet of technology.
Expectations must be realistic, though, about gains from this kind of investment democratization. Sustained 20% annual returns are increasingly something that only top private equity managers can boast.
In the U.S., the PE industry’s 10-year performance advantage over public markets disappeared in 2019. The U.S-China cold war and Beijing’s scuttling of Ant Group Co.’s IPO — a reining in of “tech, trade and titans,” as Morgan Stanley puts it — might also weigh on future returns.
Singapore hasn’t had much luck in competing with Hong Kong for hot IPOs. But by offering a pragmatic regulatory environment for enterprises that use blockchain — not necessarily for cryptocurrencies but for eliminating inefficiencies in everything from remittances to trade finance and asset management — the financial center is acknowledging a simple reality: When it comes to making (or saving) money, Millennials and Generation Z will expect a fairer deal.
They’re the early adopters of tech unicorns’ products. Why should they be the last in line to get rich from businesses they have to explain to their mums and dads?
Unicorns In Crypto: A Growing Herd Of Billion-Dollar Crypto Companies
As Bitcoin garners more mainstream attention, crypto-centric startups are also scoring funding from VC firms to become crypto unicorns.
The second half of 2021 just started and there is already a rise in the number of unicorns emerging in the crypto world as years of resistance towards crypto from mainstream investors start to fade.
Since the year began, more than 50 cryptocurrency and blockchain-related projects have risen to the much-coveted unicorn status, with market analysts predicting more to come.
A unicorn is a company that has been valued at more than one billion dollars by venture capitalists. A few examples of unicorns in the mainstream include the likes of Airbnb, Uber and Elon Musk’s Space X that have all managed to garner a valuation in the tens of billions.
In the crypto sphere, Coinbase, the giant United States-based crypto exchange, is a keen example of how fast companies in the crypto industry can rise to prominent status.
With the likes of Amber Group, Blockchain.com and OpenSea coming to the fore to join the exclusive club of companies valued at over $1 billion, analysts predict that the list will continue to grow as mainstream adoption of crypto and blockchain increases.
Kicking off the list is BlockFi. This New Jersey-based financial services company for crypto users managed to close its Series D funding round at a whopping $350 million in March this year, setting its value at $3 billion.
Founded by Zac Prince and Flori Marquez in 2017, BlockFi has had an impressive round in terms of funding, considering the company only managed to raise $50 million in its Series C funding round last year.
BlockFi offers a variety of products to retail crypto investors including a crypto exchange and an interest-bearing account, as well as crypto loans issued at low interests. The startup boasts of being one of the few crypto exchanges that feature zero commissions and transaction fees.
With these perks, BlockFi has seen its user base grow from about 10,000 at the end of 2019 to more than 250,000 retail clients and 200 institutional investors and counting. Considering its latest funding round, BlockFi’s raised equity now stands at about $450 million since its inception.
Next up is Bitpanda. Formerly known as Coinmal, this Austria-based startup and crypto brokerage service hit a $1.2 billion valuation after a Series B funding that saw the start-up raise $170 million.
The funding series was led by Valar Ventures, a New York-based venture capital firm that was founded in 2010 and features support from partners such as DST Global. Valar Ventures has been increasingly dipping its toes in crypto startups and is also an investor in trading app Robinhood.
Riding on the growing popularity and acceptance of crypto, not to mention the crypto bull market that often increases the revenue of crypto market-infrastructure providers, Bitpanda’s latest round is a step forward from its Series A round nine months ago, when the startup raised $52 million.
According to Bitpanda CEO Eric Demuth, the company has been profitable for the past four years of its existence, thus highlighting to investors a notable ambition for the company’s aim at becoming Europe’s leading cryptocurrency payment and exchange platform.
“We are profitable, and we have been for four years, but in September we changed strategy and wanted to become ‘the’ investment platform for all Europe,” Demuth said.
The Bitpanda CEO also noted that the company is looking for more partners to access more capital and top talent. In terms of quality of services, Bitpanda is considered to be a reputable and fast service, not to mention a cheap alternative for crypto traders and investors.
The first quarter of 2021 also saw crypto and blockchain infrastructure provider Fireblocks raise $133 million in its Series C funding round.
The startup, which helps companies by removing the complexities of working with digital assets, has gone further and added $310 million after its Series D round on July 27th.
Fireblocks’ most recent fundraising has catapulted the company’s valuation to $2.2 billion in just five months. Considering its latest financing, the New York-based startup has managed to raise a total of $489 million since its inception.
Fireblocks has seen its user base grow since the start of the year from about 150 to 500 clients. In addition, the company’s annual recurring revenue has also increased by more than 300% in the last two quarters of 2021.
The firm’s CEO and co-founder Michael Shaulov said that they “expect to end the year up 500%.”
Considering the company’s annual recurring revenue in 2020 saw an increase of 450% compared to 2019, 2021 has seen a valuation boost for the company.
“We’ve already adjusted our revenue prediction for 2021 three times,” adds Shaulov in regards to the boosted valuation.
After going public via a merger with VPC Impact Acquisition Holdings in January 2021, Bakkt’s valuation was set at $2.1 billion.
The Bitcoin futures exchange backed by Boston Consulting Group and Microsoft received $207 million in cash and an additional $325 million from other investors, not to mention $50 million from Intercontinental Exchange.
The money raised by Bakkt is expected to finance the company’s move toward a focus on consumer applications for digital assets. According to reports, more than 400,000 customers had pre-registered for the Bakkt app as the platform supports more than 30 loyalty programs.
The company offers crypto trading and payments features with a fully regulated Bitcoin derivatives futures and options market.
Recently, Indian crypto exchange CoinDCX announced that it has raised $90 million in a Series C funding round.
The Mumbai-based startup will go down in history as India’s first crypto business to reach unicorn status following the investment round that was led by B Capital Ground as well as the participation of Block.one, Polychain, Jump Capital and Coinbase Ventures.
So far, CoinDCX has gathered more than 3.5 million users with intentions of using the funds from its latest fundraising to speed up the user onboarding process up to 50 million users in India.
In an announcement, CoinDCX CEO Sumit Gupta said that the firm “will be joining hands or enter into partnerships with key fintech players to expand the crypto investor base, set up a Research and Development (R&D) facility, strengthening the policy conversations through public discourse, working with the government to introduce favorable regulations, education, and amping up hiring initiatives.”
This move by CoinDCX comes at a time of great regulatory uncertainty from the Indian government in regard to it stance on cryptocurrencies. While regulatory framework proposals have been submitted by various market players, the Indian government has long condemned the use of crypto.
Formerly known as Blockchain.info, Blockchain.com is a widely popular crypto wallet and exchange that has grown significantly since its early inception back in 2011.
Boasting over $800 billion in crypto transactions to date, Blockchain.com raised $120 million in a funding round, bringing the platform’s value over $1 billion.
Blockchain.com started as a blockchain explorer that allows access to Bitcoin’s (BTC) blockchains and all its transactional data, ranging from fees to the number of confirmations for each transaction, as well as wallet addresses.
The platform currently serves over 30 million active users and has since seen its user base triple over the past year. Blockchain.com has developed support for the exploration and exchange of other blockchain-based cryptocurrencies besides Bitcoin.
Soon after raising $120 million, Blockchain.com proceeded to raise another $300 million in March, setting its value at a whopping $5.2 billion. This was part of the company’s Series C round that saw the participation of venture capital firms such as DST Global, VY Capital and Lightspeed Venture Partners.
Institutional Capital Ready To Dip Toes In Crypto
With every bust and boom cycle of Bitcoin, the crypto market will continue to grow as market experts predict that the unicorn herd is set to expand even further in 2021.
Early birds and first movers in the crypto space are starting to reap their fortunes after years of toil through the many phases of crypto volatility.
As more firms continue to reach unicorn status, evidence of the crypto market moving slowly but surely into maturity has become evident. There is a clear increase in the flow of institutional capital into the crypto space and with that, it is only a matter of time before crypto goes mainstream.