Andra Capital, a US technology fund, has raised $500 million in funding for a new digital currency that investors can use to back a group of late-stage venture capital (VC) firms, the firm's managing partner Haydar Haba told Reuters. The new token is called Silicon Valley Coin (SVC), built on the Ethereum blockchain, representing investments in US technology companies that are each worth at least $500 million.
"We're changing the dynamic in venture capital by providing more investors access to high-growth Silicon Valley assets," Haba said in an interview late last week. Haba declined to disclose the names of the investors. Andra will hold a public offering of the tokens in the summer. In the United States only accredited investors, or those with a net worth of $1 million, will be able to participate, Haba said. Non-US individual investors can purchase the token depending on regulations in their countries.
Blockchain, which first emerged as the system powering cryptocurrency bitcoin, is a shared database that is maintained by a network of computers connected to the internet. Andra's new coin is one of many ventures that have sought funding through public offerings: creating tokens on a blockchain and selling them to investors.
About 80 percent of Andra's portfolio is in late-stage firms that have raised at least two rounds of funding from established venture capital companies, according to a company document that explains the offering. The remaining 20 percent will be in early-stage ventures. Many late-stage private investments, which currently total about $500 billion, are limited to affluent limited partners and a few institutional investors, Haba said.
Andra has created 1 billion coins, priced at $1 per token, to raise $1 billion overall, Haba said. Andra says it hopes investors can post significant capital appreciation over 30 to 60 months - the estimated investment time frame to maximize returns for late-stage companies. Most VCs have an average fund life of eight to 12 years. When a fund attracts investors, Andra said there is no system to determine the period in which the capital will be available.
Andra's coin, on the other hand, can be immediately sold following the initial issuance. Andra Capital said over a 10-year period, it is targeting an internal rate of return (IRR) of 30 percent. The top 5 percent of VCs have a 40 percent IRR over eight to 12 years, but they are very exclusive and limited to the well-connected and wealthy. Meanwhile, the average IRR for the median and top quartile VCs over the past ten years are 12 percent and 20 percent, respectively, according to the Andra document.
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