A new fund launched Thursday is offering to accept digital currencies such as bitcoin and translate them into investments in pre-IPO companies.
Vancouver-based InvestX Master GP1, a wholly owned subsidiary of InvestX Capital, said in a release that its “first-of-its kind” global growth equity fund will provide access to investments in “late-stage” private companies to investors who are holding on to cryptocurrencies. The fund will accept traditional currency as well.
The fund is being launched amid a major drop in the price of bitcoin, fuelled in part by regulatory rumblings in China and South Korea.
Marcus New, chief executive officer and founder of InvestX, said the fund offered a means for investors to diversify away from cyrptocurrencies, likening the current situation to the dot-com era.
We all know the tragedy that happened for everyone that had all their money in dot-coms, and how little of it they kept
“And we all know the tragedy that happened for everyone that had all their money in dot-coms, and how little of it they kept,” New said. “What we’re saying is that cryptocurrency investors need to take at least 20 per cent of their profits and diversify it.”
InvestX’s four-year fund will be open to accredited investors in Canada, the United States and abroad. Investors can buy in with the cryptocurrency of their choice, New said, and be paid back in a digital coin, if they so desire.
InvestX says the criteria for its typical investments in private companies is that they have a minimum $1-billion valuation, an average growth rate of at least 40 per cent, and proof of a possible liquidity event, such as an IPO, coming up in a year to three years.
There aren’t many of those, New noted, saying that the fund will offer investors an opportunity to invest in around 12 to 16 of those companies, of which he estimated there are likely less than 50.
“You can’t find a billion-dollar company growing at 40 per cent in the public markets … there aren’t any,” New said, adding that a biotech company may do so once in a while for a few years.
Investors will be able to transfer their cryptocurrencies directly from their digital “wallet” to that of InvestX, the firm said, “with crypto converted to fiat at the spot rate using institutional crypto FX pricing.” The digital wallet information is encrypted and kept on a “secure offline database.”
New said his firm has found a “sweetspot” by buying “odd lots” of companies in the private markets. Those blocks can offer a discount in price, he said, because large institutional investors won’t bother with lots worth less than $25 million apiece, eliminating competition for them.
“People that were insightful should benefit for that for the rest of their lives,” New said. “They shouldn’t lose it all if there’s a big correction.”
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