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Evolution of the risk capital structure in the era of the blockchain

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Venture Capital funds are one of the main ways in which starter companies and small businesses can obtain financing from accredited investors, including investment banks and other financial institutions.

While monetary investments are the primary form of venture capitaltechnical and managerial skills can also be provided.

Why should investors choose to put their money in a company that has only existed for a few years, even months?

The simple answer is that there is always the promise of above-average returns, and any long-term investor would have difficulty saying no to the profits of three or four times the original investment.

In addition, investors are often given equity in the companies they are investing in, empowering them and making important business decisions so they can make sure that the money they have given is well spent.

For newer companies, venture capital investment is usually the only choice for financing, especially if the company has no access to other means of collecting money, for example through capital markets or bank loans. With more and more startups looking for capital from large VC companies, stand out from the crowd can be a challenge.

Timing is everything when it comes to VC funding, and start-ups must have a product or service that will demonstrate that it can generate revenue at a rapid growth rate.

According Crunchbase, July 2018, "set a record because the number of nine-digit rounds increases all over the world … [with] $ 15 billion in the venture capital business flow, July was a good time to raise $ 100 million or more. "And while venture capital firms will continue to be a popular, if not the means for startups to raise funds, there has been a noticeable shift in the sector in recent months.

Traditional VC funds naturally have a less democratic nature. Investing is not open to everyone, but rather to a few elites who meet certain criteria. The VC industry has suffered an interesting year due to blockchain technology, especially when it comes to openness and inclusion.

Blockchain technology opens up the world of VCs beyond financial institutions and accredited investors, making sure that more people can invest and join. With the ICOs, thousands of companies have gathered from the public, but with zero regulations and more than zero scammers, and the imminent future of STO actually seems much more promising.

Tal Elyashiv, Co-Founder and Managing Partner at SPiCE VC, tells & nbsp; I who thanks to the blockchain, some new funds are able to accommodate hundreds of investors, compared to tropical ten to twenty LPs of a traditional VC. & nbsp; "It allows investors to enjoy the benefits of investing in a VC fund, while engaging much smaller amounts than required to participate as an LP in a traditional VC fund, allowing investors to participate more in the fund."

When investing through a traditional VC company, it is likely that the investing company will have a functioning product and / or a market strategy, giving investors the promise that there will be an effective return on the money they are spending.

However, this is not always the case, and some investors struggle with the lack of liquidity for the investments they provide.

The lack of liquidity is a catch-22. The time needed to see a return on actual investment can be a deterrent to investors; however, if a company does not receive enough funds, its performance will be low and with profits that follow the example. As with any investment, there is always a risk.

"Traditional VCs are known to be illiquid," says Alexander Tkachenko, Founder and amp; CEO of VNX, a platform for Tokenized VC resources & nbsp; "They usually block an investor's capital for 10-12 years and, along with other restrictions, restrict access to this asset class for most potential investors."

To obtain funding from traditional VCs, you need a real product or a viable MVP to get the necessary attention from credible investors. Who wants to invest their money in a company with the promise of a product eventually delivered? & Nbsp;

This is the main reason why the ICO trend & nbsp; & nbsp; he caught everyone by surprise. With the scams and mistrust associated with the ICOs in particular, many VCs in the crypto-age are reluctant to promote companies that are just a promise rather than a proven success.

"Most high-end projects have been linked to some high-end VCs since mid-2017. Many of these projects were launched with VC funding, but without the simplest form of technology and just a white paper," he adds. & nbsp;Daniel Schwartzkopff, CEO of Invictus Capital"This is contrary to the way in which VCs traditionally worked with the mentality of" show me your product, and I will speculate on adoption. "

The VC funds have continually evolved over time, with the emergence of new changes in the financial landscape. And while the blockchain provides some important improvements, such as the democratization of VC companies and the openness to more investors than before, the question still remains about what will happen to those VC companies if, as some predict, the encryption market and blockchain will not bloom again.

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invest to earn more and repeat, hands with arrows and iconsGetty

Venture Capital funds are one of the main ways in which starter companies and small businesses can obtain financing from accredited investors, including investment banks and other financial institutions.

While monetary investments are the primary form of venture capitaltechnical and managerial skills can also be provided.

Why should investors choose to put their money in a company that has only existed for a few years, even months?

The simple answer is that there is always the promise of above-average returns, and any long-term investor would have difficulty saying no to the profits of three or four times the original investment.

In addition, investors are often given equity in the companies they are investing in, empowering them and making important business decisions so they can make sure that the money they have given is well spent.

For newer companies, venture capital investment is usually the only choice for financing, especially if the company has no access to other means of collecting money, for example through capital markets or bank loans. With more and more startups looking for capital from large VC companies, stand out from the crowd can be a challenge.

Timing is everything when it comes to VC funding, and start-ups must have a product or service that will demonstrate that it can generate revenue at a rapid growth rate.

According Crunchbase, July 2018, "set a record because the number of nine-digit rounds increases all over the world … [with] $ 15 billion in the venture capital business flow, July was a good time to raise $ 100 million or more. "And while venture capital firms will continue to be a popular, if not the means for startups to raise funds, there has been a noticeable shift in the sector in recent months.

Traditional VC funds naturally have a less democratic nature. Investing is not open to everyone, but rather to a few elites who meet certain criteria. The VC industry has suffered an interesting year due to blockchain technology, especially when it comes to openness and inclusion.

Blockchain technology opens up the world of VCs beyond financial institutions and accredited investors, making sure that more people can invest and join. With the ICOs, thousands of companies have gathered from the public, but with zero regulations and more than zero scammers, and the imminent future of STO actually seems much more promising.

Tal Elyashiv, Co-Founder and Managing Partner at SPiCE VC, tells me that thanks to the blockchain, some new funds are able to accommodate hundreds of investors, compared to tropical ten to twenty LPs of a traditional VC. "It allows investors to enjoy the benefits of investing in a VC fund, while engaging much smaller amounts than required to participate as an LP in a traditional VC fund, allowing investors to participate more in the fund."

When investing through a traditional VC company, it is likely that the investing company will have a functioning product and / or a market strategy, giving investors the promise that there will be an effective return on the money they are spending.

However, this is not always the case, and some investors struggle with the lack of liquidity for the investments they provide.

The lack of liquidity is a catch-22. The time needed to see a return on actual investment can be a deterrent to investors; however, if a company does not receive enough funds, its performance will be low and with profits that follow the example. As with any investment, there is always a risk.

"Traditional VCs are known to be illiquid," says Alexander Tkachenko, founder and CEO of VNX, a platform for tokenised VC assets, "They usually block an investor's capital for 10-12 years and together with other restrictions restrict access to this asset class for most potential investors."

To obtain funding from traditional VCs, you need a real product or a viable MVP to get the necessary attention from credible investors. Who wants to invest their money in a company with the promise of a product eventually delivered?

This is the main reason why the ICO trend caught everyone by surprise. With the scams and mistrust associated with the ICOs in particular, many VCs in the crypto-age are reluctant to promote companies that are just a promise rather than a proven success.

"Most high-end projects have been linked to some high-end VCs since mid-2017. Many of these projects were launched with VC funding, but without the simplest form of technology and just a white paper," he adds. Daniel Schwartzkopff, CEO of Invictus Capital"This is contrary to the way in which the VC traditionally worked with the mentality of" show me your product, and I will speculate on the adoption ".

The VC funds have continually evolved over time, with the emergence of new changes in the financial landscape. And while the blockchain provides some important improvements, such as the democratization of VC companies and the openness to more investors than before, the question still remains about what will happen to those VC companies if, as some predict, the encryption market and blockchain will not bloom again.

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