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Although the capital markets can’t yet feel the tremors, capital raising as we know it is experiencing a seismic shift that will benefit both investors and companies — all thanks to the technological advances Web3 makes possible.
Having barely changed over centuries, the capital markets are long overdue for disruption. Web3 enables a global user base free from traditional intermediaries and tokenisation offers a new wave of investors exactly what they’ve been searching for: fractional ownership and greater liquidity. Web3 Technology is also transforming the capital raising landscape for startups and early-stage companies who can now thrive in a digital-driven ecosystem.
Here’s why the future of capital raising powered by Web3 technology looks incredibly bright.
The near-vertical uptick in technological advancements over the past decade has opened up the private capital markets to tens of thousands of new investors across Australia, and millions more around the world. That has not only increased the volume of capital available to private capital markets, but also broadened individual investors’ diversity.
All that occurred within a Web2 environment, which is why Steve Maarbani, CEO and founder of VentureCrowd, is so excited about the potential for capital raising’s future.
“Because of what Web3 enables, we are able to fix much more complex challenges in the capital-raising process than has ever been possible before,” he says. “For example, giving founders the ability to raise flexible rounds of finance quickly and easily at the touch of a button — without the need for a broker — which we call always-on capital raising.
“There’s also a push for greater access to secondary trading and liquidity, which gives everybody a way to cash out of their position whenever they want. Then there’s the digitisation of investment communities, which effectively gives hundreds of thousands of fragmented investment communities all over the world the digital tools they need to operate investment syndicates, to close capital fast, and connect them all through the platform we are building called Vest, which is at the cutting edge of where we believe wealth-tech is going.”
Maarbani says that all of this is only being made possible because of the vast applications of tokenisation.
“Ultimately, we believe that blockchain-based tokenisation of real-world assets—in our case, shares, property and interests in managed funds— is about to become an incredibly powerful use case in crypto,” he says. “And I think that’s generally the view of people who are living and breathing wealth and investment technology around the world.”
It makes sense when you realise just how all-encompassing tokenisation is expected to become by the end of the decade. Indeed, investment bank Citi is forecasting there will be $4 to 5 trillion worth of tokenised digital securities in the market by 2030. In addition, it predicts “$1 trillion of distributed ledger technology (DLT)-based trade finance volumes” by the same year, according to its latest Money, Tokens, and Games report.
Even for startup founders who are digital natives, there may be an inherent fear associated with the uber-digitisation of an already technical sector like capital raising. But Maarbani says next-generation services like Vest will not only democratise the cap-raising process, they will also make it easier for founders to close deals with more confidence.
It’s also good news for investors, especially those who have been previously averse to certain asset classes because of a perceived lack of liquidity.
“The big change for investors is that now when they invest in a venture capital product or a property development product— essentially any product that has a medium- to long-term hold period that in the past was relatively illiquid — they will now have access to liquidity if and when they need it. That’s something we know investors will really welcome.
“For instance, I’m a shareholder in VentureCrowd, and in due course I may consider whether I should sell a few tokens in order to liquidate some of my position to pay off my mortgage or make other investments. We should be getting excited about the liquidity that tokenisation can afford us.”
Ultimately, Maarbani believes Web3 and blockchain-based tokenisation are hugely positive advances for the industry, and they are changes that will enhance the capital-raising journey for all founders.
“This is a really good news story,” he says. “The digitisation of the private capital markets has changed the way founders can raise capital. It genuinely makes it easier than ever before to connect with millions of investors around the world, and it has already generated hundreds of millions of new dollars into the venture capital market in Australia and globally.
“Looking to the future, founders will be in a much better position and have much more negotiating power compared to the historical environment where their cap-raising options were much more limited.”
Read now: Three capital raising trends affecting founders today
VentureCrowd is a leading wealthtech platform democratising access to alternative assets. With over 70,000 registered members, VentureCrowd is Australia’s only multi-asset class platform enabling retail, wholesale and institutional investors to co-invest in the same property, venture capital, fixed income and managed fund opportunities on the same economic terms.
