By Cindy Taylor/Publisher
We recently caught up with Haydar Haba, CEO of Andra Capital which is currently queueing up the launch of their Silicon Valley Coin (SVC). We have chosen to rarely cover the Initial Coin Offering/ Security Token Offering space of late, but we do think this one bears further exploration.
First, this is a STO that will be tokenizing a late stage technology private equity fund.
That is a key difference. Early on in the whole ICO craze, investors were essentially funding start-up companies, with little to nothing underlying them. The ICO was simply a new form of crowdfunding, but with more technical detail (i.e. it was being transacted via blockchain) and most notably, liquidity, because the coin behind the offering was tradable on token exchanges. Many of the accompanying white papers were simply knocked off from standardized templates and substituted as a business plan – just a new, shiny name.
The tokens were then listed on exhanges. However, token exchanges are VERY different than the Nasdaq or NYSE or CME. These have been largely non-regulated to date, though many players are moving toward reglated oversight, including Overstock’s T0 exchange and many offshore exchanges, such as those in Gibraltar, amongst others
The lack of regulation, however, put this form of offering squarely in the Wild West, which many offerings (though not all) have been to date. Hence many recent articles have come out citing hundreds if not thousands of business failures behind many of the earlier ICO offerings, many of which were (sadly) fraudulent schemes, with non-existant management teams and businesses that were never intended to actually launch. Though it’s unfortunate, this should come as no surprise to investors, and we have previously written that many (if not most, BUT not all) should be viewed as the equivalent of penny stocks and invested in with eyes wide open.
To address that lack of credibility, Andra Capital has layered in several layers of oversight and protection into the SVC offering, in order to provide “qualified investors” with a compliant, audited, liquid token, via a RegD 506C listing (thank you Jobs Act!).
The fund underlying the token will be audited by Deloitte, with legal advice provided by DLA Piper, and clearing via Apex, all major players in their respective lanes. The portfolio will be calibrated to invest 80% in blue chip, pre-Unicorn technology companies and 20% as discretionary, with opportunitistic investments planned in blockchain, private equity, and offline listings.
We specifically asked if fintech (our favority category of tech, of course) would be included, and Haba confirmed that it would be an important investment category. He also stated that as many of 35 companies have already been reviewed and are under consideration for investment, and confirmed that the majority are, in fact, in Silicon Valley, though certain international companies are also in the list, most notably from China. The end game is to bring the fund up to as high as $1B AUM and then launch a new fund with an eye toward commercial real estate on the next round, but not a REIT.
Minimum investments in this offering are $50K pre-token sale and will be reduced to a $1K minimum once the official sale is underway, but again, only from qualified investors. There will be a one year lock-up on investments, as per the norm for most investment funds. The firm will also be investing heavily in listing on up to as many as 20 token exchanges. For those not in the know, annual listing fees on these exchanges can vary from the hundreds of thousands to millions annually, so endeavoring to list on this many exchanges will be an expensive proposition for Andra Capital, but one that should presumably contribute to more successful liquidity of the token.
Finally, Haba stated that in addition to the multiple exchange listings, they currently have plans to work with 3 market makers (broker/dealers) to help create token liquidity. In order to keep the SVC token at a viable net asset value relative to the fund’s portfolio, they have also designed the smart contract so the fund will buy back tokens if the NAV of the tokens falls below 90% of the actual portfolio value. Likewise, they will deploy coins to cool down pricing if the token gets overheated.
So, are we endorsing Andra? We don’t endorse any token offerings at FintekNews, but we do believe that Andra Capital has taken many of the right steps to ensure the fund and token’s long term success and viability, provided the firm manages its capital and resources effectively.
You can find more information on the offering at the firm’s website: https://www.andracapital.com/.