Finance Magnates had the chance to set up an interview with Tal Elyashiv, founder and managing partner of Blockchain venture capital firm SPiCE VC.
Founded in 2018, the SPiCE fund is structured to provide its investors with access to promising startups within the blockchain industry. Some of the firms in which SPiCE VC has invested include Securitize, Bakkt, Archax and Lottery.com.
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In this interview, we sat down with Mr. Elyashiv to get his take on recent developments and discover more about what it takes to secure a slice in the highly competitive industry. What follows is the summary of our conversation.
Why did you choose Fusang Exchange as the new destination for SPiCE listing? And what does it mean to be the first digital security to debut trading there?
We are always looking to expand our investors’ liquidity options. Currently SPiCE security can be traded on OpenFinance network and on SharesPost. Both SEC regulated with a focus on US investors. However, our investors are almost equally split between the US, Europe, and Asia and we wanted to enable better exposure to Asian markets.
In addition, Fusang is one of the first Asian regulated security exchanges, that is also a licensed digital security exchange. Fusang integrated technology and process wise with Securitize’s DS protocol which allows us to ensure full regulatory compliance in real time.
SPiCE is already available for trading on Openfinance, so how Fusang’s listing could make a difference?
Digital Security technology allows transparent and regulatory compliant listing of the SPiCE security on multiple exchanges. Given the early stage of the market, it is important for us to enhance liquidity options for our investors.
OpenFinance has not, to date, lived to its full potential of liquidity for several reasons, one of which is the fact that it is a non custodial marketplace which results in a cumbersome process of onboarding clients and trading. Fusang is targeting Asian markets (although it is available to investors from most other jurisdictions) and created exposure to liquidity in those markets. Also, the services and tools Fusang offers its clients are more advanced and user friendly than the ones offered by OpenFinance, and Fusang is also licensed as a securities custodian, which can also improve liquidity.
Do you expect the new listings to better reflect SPiCE VC’s performance and improve the token ranking?
The SPICE security’s value is directly derived from the value of SPiCE VC’s investment portfolio value. This is because the security entitles the holder to full economic rights on the performance of the investment portfolio (pro-rata). Exactly like the economic rights LPs in a traditional VC fund are entitled to.
As a result, we expect market forces to keep SPiCE’s price somewhere around the last NAV per token published (we publish a NAV report quarterly) as it is the best proxy to the value of the security.
However, liquidity does have a value. There are different numbers thrown around but it seems that the market values liquidity vs. no liquidity on similar assets at somewhere in the 30%-50% premium. So if listing on Fusang will end up improving liquidity, it will improve SPICE’s theoretical value.
However, the best thing we can do to improve SPICE’s value and rating is to keep on doing extremely well in terms of the investments we make and the investment portfolio performance. So far, over the first two years, the portfolio value has appreciated by 65% – very impressive for a VC fund, where the initial years are usually on the downward slope of the j-curve.
How far your recent partnership with Coinbase Custody could boost the appeal of SPiCE among institutional investors, in particular?
It is significant. As the digital securities market matures from very early adopters to mainstream, institutional investors and banks are beginning to join the ecosystem. We have seen a lot of that in 2019 and this year. Some names include HSBC, Fidelity, World Bank, Santander, Societe Generale, MUFG, SIX, Credit Suisse. As part of this movement, many ecosystem components in the digital securities industry need to develop in order to support the need of large players and institutional players.
Third party custody is certainly one of these services. Since in our current raise (the second closing of the fund) we are talking to large family offices, funds of funds and institutional investors, it is important for us to ensure that these services/components will be there to support SPICE for the benefit of these investors.
The coinBase partnership is a significant part of that. We are also in conversation with several traditional financial institutions who provide 3rd party custody services for securities today about supporting the SPICE security as well.
Overall, do you believe digital securities platforms like Fusang provide an opportunity for blockchain companies that most likely will remain overlooked by traditional exchanges?
Yes. They do. And there is some value in that, but I believe that this is relatively temporal and more indicative of the early stage of the industry we are in.
I think that in the grand scheme of things, this is likely to have little impact on the overall growth of the digital securities space.
We believe, and the last two years support this vision well, that the the whole securities/capital-markets industry will be digitized within 10-15 years. This will be the way all securities, private or public are done. There are over $1.5 Quadrillion worth of assets globally that can be digitized (Bonds, stocks, derivatives, real-estate, etc). This is a huge potential and requires significant buildup of technology and services.
What will drive this growth is participation and adoption by banks, large issuers, institutional investors and major capital market players. This movement has already started in 2019 and is accelerating by the day.
Ultimately, the interest in financial assets is derived by their perceived value. Valuable assets will find their way to more central venues (major exchanges) while others will be traded on more minor exchanges and marketplaces – exactly as it happens with traditional securities.
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