Berlin-based Neufund said it has raised $10 million euros ($11.6 million) from private investors for its fund-raising platform, one of the first that will allow companies to issue a token or digital currency that will represent equity. CapchainX has already launched equity-backed tokens, and it has been in existence for more than a year, said the company's chief executive officer and founder Beryl Chavez Li in an email.
In an interview with Reuters on Tuesday, Zoe Adamovicz, Neufund's co-founder and chief executive officer, said the platform is already set up, and that by the first quarter of 2018 companies will be able to use it to raise funds. In the meantime, Neufund will launch a fresh funding round on November 17 for investors to contribute capital to the platform, Adamovicz said. The financing round will last for 30 days, but is not open to US investors, she added.
Neufund's platform will allow investors to finance projects, while acquiring equity in the form of tradable crypto-currencies. This venture, Adamovicz said, creates a new type of asset: a token that represents equity, but is liquid and tradable like a currency. Typically, start-ups can raise funds directly from investors in initial coin offerings (ICOs). These do not represent equity in a company, but give access to a service or product.
Companies raising funds in ICOs are in the blockchain space, which started as a digital ledger of transactions that underpinned crypto-currency bitcoin. Under a venture capital investment, meanwhile, investors take an equity stake in a start-up, but the share itself is illiquid. "If you look at the inefficiencies and transaction costs that firms incur in the way capital is raised in the venture capital market, it can cause a lot of friction and costs which this technology disruption (blockchain) can really help fix," said Philipp Freise, head of the technology, media and telecommunications industry team at private equity firm KKR.
Freise was an investor in Neufund's earlier funding round. At its new funding round, Neufund will issue its own token called Neumark (NEU) to investors. The amount of NEU held represents the individual's or company's share of the Neufund network. When an investor uses the funds they committed to the platform to invest in a company's equity token offering, the investor will receive equity in the form of the company's crypto tokens. The investor will also receive NEU tokens.