Poloniex to “Spin Out” of Circle & Become a New Independent International Company

Circle announced on Friday that its internal group, Poloniex, will be “spinning out” from Circle to become a new independent international company called Polo Digital Assets, Ltd. According to Circle, the spin-out, which is back by an undisclosed Asian investment group, will bring significant resources and freedom to deliver the product features and marketing strategies needed to be competitive.

Circle also noted that while the spin-out is happening, it will be doubling down its efforts to build a more open, global, and accessible financial system, which will include significantly expanding the services it offers that are built around fiat stablecoin USDC along with expanding and growing equity crowdfunding platform SeedInvest.

“It is bittersweet for Circle to seed this incredible product and business spin out on its own. Nearly 18 months ago, Circle acquired Poloniex with a vision of building a broad digital asset marketplace that included a rapidly growing range of tokens and digital assets. We’ve made enormous progress with Poloniex, including massive infrastructure improvements, adding more fiat options with USDC integration, launching best in class native apps for traders and building global operations capabilities that can deliver excellent customer service.”

Circle also noted that earlier this year it completed the acquisition of SeedInvest. The platform’s plan with the equity crowdfunding platform is to transform how companies raise capital and open up investment opportunities to people everywhere.

“We have been working hard to introduce new service built on Seedinvest that allow for fundraising using tokens and digital assets, marrying traditional financial contracts and assets with crypto.”

Circle went on to add its mission is to help create a global internet financial system and the company hasn’t wavered but it must adapt and course-correct its strategy for achieving them.

3rd Round: NowRx Seeks $20 Million as it Returns to SeedInvest with Crowdfunded Offering

NowRx, an on-demand pharmacy that provides same-day delivery, is returning to SeedInvest for its 3rd crowdfunded offering.

NowRx is seeking up to $20 million on a pre-money valuation of $65 million. Like many of the offerings on SeedInvest, investors get preferred equity in the Series B funding round.

NowRX says it raised $500,000 in the first 24 hours of going live and, as of today, the offering stands at $1.124 million.

Last year, NowRx completed a $7 million Series A found on SeedInvest representing the largest ever crowdfunding round on SeedInvest for a health care company.

In a release, NowRX CEO Cary Breese said:

“We have carefully developed and proved our disruptive on-demand model. With just our first pharmacy facility we have experienced amazing growth: 2018 revenue was $4.7M, up 90% year over year and, based on July 2019 revenue, our annualized run rate is $7.4M – and we are taking our proven concept into new markets.”

He added that, in his opinion, no one has the tech that NowRX has and the Pharmacy space is ripe for disruption.

A fully licensed pharmacy, NowRX delivers by car. No more queues or driving to the local drug store. NowRx reports that 90% of their customers plan to use the service again.

To date, NowRX has filled 100,000+ prescriptions for more than 18,000 customers. 4500 doctors have prescribed meds.

So can the Pharmatech firm scale? If they raise enough money they are going to find out.

The securities offering is being completed under Reg A+ and the SEC has qualified the filing.

The most recent Offering Circular is available here.

App based Lending Platform Lenmo Seeks Up to $3 Million on SeedInvest

Lenmo, an alternative lender that is a marketplace for investors to fund loans all on an App, is raising up to $3 million on SeedInvest.

Lenmo is a small-dollar lender that will provide credit when banks say no as it will accept subprime borrowers – ostensibly at a better rate than some other lenders.

For borrowers, you choose the amount and the term and multiple lenders compete for your loan. Investors (lenders) include financial institutions, lending businesses, and individual lenders. While still small, Lenmo reports having originated over $1.2 million in loans to date for 5000+ individuals. By connecting to friends and families via Facebook, a borrower can easily tap into their personal network to borrow the money from known people.

Currently, Lenmo loans are single peer to peer – meaning you cannot invest in fractions of loans. You can choose varying risk/return levels.

Of note, Lenmo says that Lenmo Enterprise, a solution designed to make investing in the small loan market already has 45 enterprise signups with another 75 in the pipeline.

Lenmo is another example of the ongoing disaggregation of the traditional banking market.  By removing the middle man, Lenmo may originate loans in a more streamlined process at a lower rate while investors may directly participate in the asset class.

Lenmo makes its money by charging borrowers a 1% fee on the loan principal or a minimum of $3 regardless of interest rate and payback period.

Lenmo is doing a side-by-side Reg CF-Reg D offering on SeedInvest. The “Series Seed” is at a pre-money valuation of $10 million for preferred equity. So far, $102,501 has been raised under Reg D and $2,501 under Reg CF. The minimum target is a raise of $700,000. A year ago, Lenmo did a Seed round of $430,000 at a valuation of $8 million.

SeedInvest Hammers on Definition of an Accredited Investor: “the current accredited investor definition is severely misguided and needs to change”

SeedInvest, one of the largest investment crowdfunding platforms in the US, has posted a comment letter pertaining to the Securities and Exchange Commission’s (SEC) concept release on regulatory harmonization. The comment letter is expected to be “one of multiple” letters with this first one addressing an update to the definition of an accredited investor.

The comment letter is authored by SeedInvest CEO and co-founder Ryan Feit who shared the following comment with Crowdfund Insider:

“Updating the outdated accredited investor definition is critical for supporting startups and leveling the playing field for Main Street investors.  As we pointed out five years ago in a previous comment letter, the accredited investor definition needs to include additional measures of sophistication, in addition, to merely how much money someone has or makes.  We implore the SEC to leverage its statutory authority and implement these crucial changes.”

The current definition of an accredited investor limits participation in certain exempt securities offerings only to individuals that qualify under certain wealth metrics. As it stands today, certain offerings are limited to individuals with a net worth of over $1 million (not including a primary residence) or someone who earns over $200,000 a year, creating a hard-line barrier that blocks the majority of the country investing in a market that is far larger than current public markets. But as common sense dictates, the size of a bank account is a poor metric for financial sophistication. As Feit outlines, the following professions are currently blocked from investing in Reg D offerings:

●  U.S. Congress Member (annual salary of $174,000)
●  An employee at the SEC (average annual salary of $186,000)
●  Securities Attorney (average annual salary of $104,000)
●  Harvard Professor (average annual salary of $198,000)

Additionally, the current definition makes no adjustment for geography.  A $100,000 salary is far different in the middle of the country than mid-town Manhattan.

Feit advocates for a more rational sophistication qualification. Individuals with the skill and knowledge to invest in private assets simply makes sense:

The following groups of people can “fend for themselves” says Feit:

●  Passing an Exam – People are allowed to drive a car once they pass an exam, so why not enable people to pass a test to prove that they understand the mechanics and risks of investing in private companies?
●  Advance Degreed – Individuals holding an advanced degree in business/law related fields (i.e. MBA, J.D., Masters or PhD in Finance, Economics, Business, etc.)
●  Professional Designations – Individuals with Professional Designations (i.e. J.D., CPA, CFA, etc.)
●  Securities Licenses – Individuals who hold Securities Licenses (Series 7, Series 63, Series 24, Series 79, Series 82, SIE, etc.)

Facts Count

Feit points to the reality there is a growing wealth gap in the US. This “economic epidemic” is being exacerbated by the current definition of an accredited investor:

“The gap between the wealthiest 10% and the rest of the country has never been more pronounced. In 2018, the richest 10% held 70% of total household wealth, up from 60% in 1989. One of the causes of this continued widening of the wealth gap is due to the fact that only the wealthy can invest in the highest yielding investment historically,” Feit states. “Over the past 25 years, venture capital has returned an average of 31.66% per year, compared to just 9.80% for stocks and 5.36% for bonds. As long as Main Street investors remain shut out from investing in asset classes such as venture capital and private equity, they will never catch up to the wealthy. It may sound cliché, but it’s quite true—until we level the playing field by changing dated regulations such as the accredited investor definition, the wealthy will just keep getting wealthier.”

While there are a few individuals that flaunt common sense and oppose a broadening of the definition of an accredited investor, insiders expect the SEC to move and update this rule that has disenfranchised far too many for too long.

[pdf-embedder url=”https://staging-crowdfundinsider.kinsta.cloud/wp-content/uploads/2019/09/SeedInvest-Comment-Letter-on-SEC-Concept-Release-9.24.19.vF_.pdf” title=”SeedInvest Comment Letter on SEC Concept Release (9.24.19).vF”]

Association of Online Investment Platforms Visits Capitol Hill to Discuss Crowdfunding Exemptions & More with House & Senate Staffers

The Association of Online Investment Platforms (AOIP) visited both House and Senate staffers last week, along with a meeting at the US Department of Treasury. The goal of the trip was to review the status of current crowdfunding exemptions and what must be done to improve the emerging ecosystem of providing access to capital to promising young firms. The trip to Washington, DC involved AOIP founding platforms, advisors, and the Small Business and Entrepreneurship Council (SBE Council) – a  leading voice for entrepreneurs and small business.

The creation of AOIP was publicly announced in September of 2017. The Association seeks to boost trust, educate investors while advocating on behalf of the investment crowdfunding industry. Each of the founding platforms is a FINRA regulated funding portal and each platform is affiliated with a regulated broker-dealer. The founding platforms include: SeedInvest, Republic, NextSeed, and Microventures.

At the time of the announcement of the new Association, the founding members published a policy position paper addressing desired changes to existing securities law. Investment crowdfunding became law following the signing of the bipartisan JOBS Act of 2012. During the meetings at both the House and the Senate, AOIP members advocated for an increase in the funding cap of Regulation Crowdfunding or “Reg CF” (from the current $1.07 million to $10 million), as well as an update on investor limits, enabling special purpose vehicles (SPVs), and more. While much of the discussion centered on Reg CF, other securities exemptions, including Reg A+ and Reg D, were part of the conversation. The recommendations by AOIP were well received by staffers from both parties.

Founding AOIP Chair and founder and CEO of NextSeed Youngro Lee, commented on the meetings:

“As we continue to see more utilization and success of Regulation Crowdfunding, it is becoming clear that improving the rules will enable even more businesses and investors to benefit and create value for each other.  Many congressional leaders and regulators understand this principle, and are working hard to develop the proper rules while balancing appropriate protections.  Meeting with key stakeholders in our government provided us the opportunity to share our perspectives and insights, which we greatly appreciated.”

Karen Kerrigan, President and CEO of SBE Council and a long-time advocate for entrepreneurs, said the meetings were highly successful but more work was needed:

“Capitol hill staff and key policy leaders found the data shared by AOIP members, and the rationale for raising the funding cap and the need for other reforms, both intriguing and compelling. We are off to a solid start in advocating for changes that will improve regulated crowdfunding to make it a more viable option for entrepreneurs to raise the capital they need to launch and grow their businesses.”

During the day-long excursion on Capitol Hill, AOIP members and advisors participated in a pane over lunch held in the Capitol moderated by Andrew Dix, Crowded Media Group founder and CEO. Staffers were invited to pose questions to AOIP members as the Association introduced themselves as a leading voice for online capital formation and access to opportunity.

Doug Ellenoff, Managing Partner of the law firm of Ellenoff, Grossman & Schole and counsel to AOIP, noted that in an otherwise difficult political environment for agreement, not unlike when the original JOBS Act was passed overwhelmingly by both parties in 2012, reception for AOIP’s message to modify the now 3-year-old rules to improve the Regulation Crowdfunding rules was generally positive and constructive.

Maxwell Rich, Deputy General Counsel of Republic – a full-stack investment platform including digital assets, stated:

“As Regulation Crowdfunding has grown, matured and gained traction amongst the general public, the same trend has occurred on the regulatory, legislative and administrative fronts. The AOIP’s meetings with key legislative and administrative representatives this week, coupled with the Commission’s Harmonization Concept release, provides a strong signal that this novel offering exemption is on the upswing and may soon see progressive changes to its foundation, which should ensure continued growth.”

Ryan Feit, co-founder and CEO of SeedInvest – now part of leading digital asset platform Circle, has been around the industry since before the JOBS Act was signed into law. Feit said that their shared experience and empirical data will help sway legislators as it is hard to argue against facts:

“Seven years ago on Capitol Hill, our conversations regarding equity crowdfunding were very theoretical,” said Feit.  “It was great to return after years of experience, armed with actual hard data which proves that equity crowdfunding truly works.”

During the many meetings with Capitol Hill staffers, AOIP distributed the Association’s position paper and discussed data regarding capital raises to date. The Association also emphasized the fact that under Reg CF there has been no fraud to date, in contrast to what some observers predicted at the time the JOBS Act was signed into law.

AOIP plans to return to Washington, DC soon to continue the conversation with policymakers and work closely with Congressional members interested in supporting capital formation and access to opportunity for all Americans – regardless of location. AOIP also recognizes the importance of providing access to solid investment opportunities to smaller investors and not just the well-to-do.

As part of the mission of AOIP, a Code of Conduct has been published which sets a higher bar of conduct for member platforms. In the coming months, AOIP will be initiating outreach to other investment platforms interested in pursuing the outlined industry goals while fostering a sustainable ecosystem for the US crowdfunding market.

[Editors note: Crowded Media Group is the parent company of Crowdfund Insider.]

Cross Atlantic Crowdfunding Offering: Arival Bank Closes at USD $ 2.145 Million on SeedInvest – Crowdcube

Arival Bank, a digital-only challenger bank, has closed its crowdfunded bridge round (preferred equity) on SeedInvest-Crowdcube. Arival is the creation of a VC firm based in Singapore that claims 20 investments & multiple exits.

The securities offering was a cross-Atlantic crowdfunding offering via the two platforms which established a partnership some time ago to share certain offerings. A quick review indicates that about £330,000 was raised via the Crowdcube platform. The pre-money valuation was set at USD $15 million, according to SeedInvest.

Arival Bank is seeking a banking license via Puerto Rico – a US territory with a unique international banking law for “International Financial Entities” (IFE). Arival wants to provide a Fintech bank for a “new generation of small and medium-sized companies” unburdened by past geographic constraints. If the license is approved, Arival states it will “go-live” next month (October 2019).

Arival states:

“The underbanked SME industry is a combined trillion-dollar industry. Freelancers, startups & SMEs present a real demand for banks, which has yet to be met. This is a relatively untapped market (especially in the US). It is likely innovation in the SME space will continue to grow, which means more of these businesses and entrepreneurs will be seeking forward-thinking fintech partners to meet their banking needs.”

As many observers know, the digital banking sector is a red-hot segment of Fintech with many early entrants garnering billion-dollar valuations. Arival is not there yet but it obviously hopes to be at some point in the future.

Arival has publicly stated that it intends to launch a Series A round to raise around $10 million at a possible valuation of $50 million – all predicated on being approved by the authorities in Puerto Rico.

Arival also claims that its waiting list of clients is “extremely large in terms of assets & transaction volume.”

The company’s plan is to “build the most profitable digital bank within 3 years.”

Of note, the offering on SeedInvest was only open to accredited investors under Reg D 506c. A minimum investment was set at $10,000. In the UK, crowdfunding platforms are not hampered by such delineations.  Anyone could invest in the aspiring digital bank.

Update: Arival Set to Close Equity Crowdfunding Round With Nearly £1.2 Million in Funding

Arival, a digital bank that seeks to be crypto-friendly, is set to close its equity crowdfunding campaign on Crowdcube with nearly £1.2 million in funding. The banking group reported that the progress bar includes £1,065,060 raised through a co-offering (i.e. on SeedInvest). The Crowdcube round has attracted more than 300 investors. Arival is offering 8.88% in equity at a £12,012,061 pre-money valuation.

As previously reported, Arival was founded on the notion that banks in many places around the world are closing accounts of crypto-related businesses as they are fearful of any collateral ramifications to holding these types of accounts. The Singapore banking startup revealed:

“We partner with some of the hottest fintechs on the market to deliver a full suite of financial products and tools hand-picked to help run your business. Anything from corporate expense cards, international transfers, factoring, lending, savings, and much more.”

Arival also revealed it has applied for an International Financial Services Act (IFE Act) banking license last year and hopes to receive it this summer. The banking group has applied in Lithuania (EU) plus sandbox app in Malaysia, with the UK, Singapore, Hong Kong, Australia, Japan, and Dubai in the pipeline.

“The underbanked SME industry is a combined trillion-dollar industry. Freelancers, startups and SMEs present a real demand for banks, which has yet to be met. This is a relatively untapped market (especially in the US). It is likely innovation in the SME space will continue to grow, which means more of these businesses and entrepreneurs will be seeking forward-thinking fintech partners to meet their banking needs.”

Funds from the Crowdcube and SeedInvest campaigns will be used to continue the growth and development of the Arival platform. The funding round is set to close this evening.

Circle Plans $100 Million Venture Fund Working with SeedInvest

Digital asset ecosystem company Circle is planning a $100 million venture fund. The company will apparently leverage the SeedInvest investment crowdfunding platform which Circle acquired last year.

According to a job posting on LinkedIn, Circle is seeking a General Manager to work with SeedInvest senior management to launch the fund and take advantage of SeedInvest’s network of 250,000 investors. According to the listing, so far 44 individuals have applied for the job.

The post notes that SeedInvest has funded over 150 early-stage firms. Reportedly, 40,000 aspiring issuers have applied to raise capital on the platform but only 1% have been accepted as the company is highly selective in approving issuers to raise capital on the site.

SeedInvest currently raises capital under the full stack of securities exemptions including Reg A+, Reg CF and Reg D. The aforementioned fund would need to be issued under Reg D and thus available only for accredited investors/institutions. SeedInvest does have a partnership with UK based investment platform Crowdcube which potentially could be brought into the equation to solicit international investors.

Additionally, SeedInvest is a FINRA regulated broker-dealer and has acquired an Alternative Trading System (ATS) license it has yet to utilize.

Over time, expect SeedInvest to incorporate blockchain technology to issue digital securities which may trade on an in house secondary market.

Digital Bank Arival Struggles to Hit $3 Million Goal in Crowdfunding Offer but Reportedly on Track to Top Minimum

Arival, a digital bank that seeks to be crypto-friendly, has apparently only raised $210,000 of a funding round of $3 million on SeedInvest. The securities offering is being cross-listed on Crowdcube which indicates a larger amount of £348,912 being raised on a hurdle of £700,000. The Crowdcube offering page includes “£264,336 raised via a co-offering being conducted abroad” which may not have been recently updated as the SeedInvest recently declined from over $300,000 to just over $210,000 displayed today.

Digital banking is a hot sector of Fintech with challenger banks being valued in the billions of dollars. Currently, there are a good number of both UK and US digital banks that have captured solid momentum as they seek to compete with brick and mortar banks by providing better services with fewer unnecessary fees.

Arival aims to differentiate its banking services in several ways.

First, it wants to be the bank for “abnormal” clients – IE crypto/blockchain-based firms which may struggle to gain access to banking services.

Second, it is interesting to note that Arival is applying to receive a US banking license via Puerto Rico – a US territory with a unique international banking law. “International Financial Entities” (IFE) are governed by US federal authorities and may gain access to the Fed but comes with interesting features such as a 20-year tax exemption on all income earned and a 4% tax rate on corporate profits, according to Arival’s investor deck. There is more information available on the IFE here. Arival applied for the license in April 2018 and hopes to receive approval next month (October 2019). At the same time, Arival has applied for licenses in both Lithuania and Malaysia (uncertain which license).

A recent comment on the SeedInvest offering page asked if Arival will cancel the offering if it fails to reach the minimum hurdle. Arival had this to say:

“We currently have larger ticket investments going through the final stages of being reflected on the platform. We hope to have the raise total updated by the end of this week, which will effectively have us surpass the minimum investment goal.”

Founder Jeremy Berger says Arival “plans to be the leading digital bank for a new generation of SMEs within 24 months.”

The bridge offering is scheduled to close within the next ten days – unless it is extended.

Crypto Friendly Digital Bank Arival Accepting Investment Reservations on SeedInvest for Upcoming Crowdfunding Round

Digital challenger bank Arival is now accepting reservations for preferred stock on SeedInvest.

Arival will be a crypto-friendly bank – unlike most traditional banks in the United States which tend to be crypto-averse.

The bank was founded on the notion that banks in many places around the world are closing accounts of crypto-related businesses as they are fearful of any collateral ramifications to holding these types of accounts. Arival says they surveyed “hundreds” of Fintech and blockchain startups in their network and 90% indicated they have encountered problems in some capacity.

But it is not only the crypto-sector that Arival wants to service. The digital-only bank wants to provide banking services to all SMEs and GIG economy companies seeking an alternative to the high cost, low service, experience of traditional brick and mortar banks.

Based in Puerto Rico, Arival has applied for banking license under the International Financial Services Act (IFE Act) and expects approval soon.

The IFE license will provide Arival with access to the US Federal Reserve system while still being an offshore bank which makes the license unique. Even better, an IFE license means the bank is subjected to just a 4% tax rate. The relatively new law has become fairly popular due to the advantageous structure and access to the US market.

Arival also states it has commenced the process for a license in Europe too.

Jeremy Berger, co-founder and COO of Arival, wrote a great blog post on the banking license odyssey. As one would expect, receiving a banking license is not easy and it takes a lot of time.

As for its tech stack, Arival is working with Mbanq to “integrate cloud-based core banking technology.” Regulatory compliance will be core to Arival’s operations.

The actual bank plans to launch in October 2019.

Arival Bank was founded in 2017 by Slava Solodkiy & Igor Pesin. The duo had found some success by backing some well known challenger banks like Fidor or Moven. The experience in the challenger bank world and the challenge crypto businesses were experiencing in getting access to simple bank accounts were enough to propel the entrepreneurs to launch their own bank.

Having previously raised $1 million in seed capital, it appears that Arival is ready for the next step. Crowdfunding capital is a well-trodden path for digital banks as it guarantees a boost in name recognition while driving bank customers as your shareholders will definitely want the bank to succeed.

So what do you get when you invest in Arival? 

For the moment, SeedInvest is only taking non-binding reservations. There will be a minimum investment of $10,000 per investor. The round seeks $3 million at a pre-money valuation of $15 million for preferred equity. Few other details of the security are available as of yet.

It has been reported that SeedInvest partner platform Crowdcube will also be co-listing the offer which makes a lot of sense. Banking is regulated at the national level but services are provided globally. Geographic boundaries are becoming less important for digital natives. Consumers and SMEs just want great banking services at a low cost, all available on a smartphone. And that’s what Arival hopes to provide.

Assure Services Claims to be the Largest SPV Service in the World and it Has Many Fintech Platforms as Clients

Recently Crowdfund Insider encountered a successful service that is not exactly a high profile business in the Fintech world. Back office fund management provided by Assure Services. What we did not realize is that many Fintech platforms are outsourcing their fund management so they may better focus on what they do best which is frequently raising capital and managing issuers and investors.

Assure Services claims to rank 5th in the world when it comes to funds under management – so it is providing a significant service. Assure also claims to be the largest SPV (special purpose vehicle) manager in the world.

Assure also claims over 30 clients in the crypto market assisting with fund setup and administration (including SPVs) to initial coin offering (ICO) purchases.

Assure helps its clients to lower costs, simplify compliance by allowing a specialized team manage the record keeping, and aiding in the client’s growth as it can rapidly scale as volume increases.

CI recently had the chance to discuss Assure Services with founder and CEO Jeremy Neilson. Our discussion is shared below.

How did you get into the alternative investment management space?

Jeremy Neilson: I was hired to launch and manage the Utah Fund of Funds.  The Utah Fund of Funds is a $300 million State of Utah sponsored fund of funds.

I spent 7 years building the program ultimately winning a number of Best of State awards and become a premium double bottom line program in the United States.   We invested in 28 venture capital and private equity funds across multiple asset classes (VC, Buyout, Energy, Distressed, and more).

When I started Assure, we offered due diligence advisory and investor relations services.

In July 2013, I was contacted by a well-known angel investor platform and [was] asked if Assure could set up fund entities in bulk. I said, “yes,” and we developed a process to provide these services to other investors.

In the space of less than six years, we have grown to more than 200 clients and more than 4,300 deals.

You currently service AngelList, EquityZen and SeedInvest. Can you share any other platform names? Exactly which services are you providing for these platforms? Following SeedInvest’s acquisition – are you still providing services?

Jeremy Neilson: We are still providing services to SeedInvest.

[Other platforms include] FundRx, Propelx, Launch, Forge, EquityMultiple, and SPV Fund Administration services.

How do you see the online capital formation industry evolving?

Jeremy Neilson: I see online capital formation growing and growing.

The rising generation is more comfortable and prefers to invest on their phones.

Newspapers, magazines, in office visits, and even online systems are not part of investors joining the investment community.  Trusted recommendations and ease of use are the two most important factors in deciding what assets to invest in.  Hence, online capital formation will continue to grow.

Speaking about Real Estate specifically, this sector of crowdfunding has seen some high profile failures as well as some resounding successes. What are the differentiators, in your opinion?

Jeremy Neilson: Management is the difference.

Those groups with strong management and smart decisions thrive.  One big management decision is using outsourced administrators rather than build that expertise in house.  The best groups focus on what they do best which are deals and investor networks leaving the other areas like the administration to experts in those areas.

How do you see real estate crowdfunding evolving over time?

Jeremy Neilson: It is my opinion that Real Estate Crowdfunding will become a comfortable and frequently participated in investment vehicle.

Crowdfunding provides the two most important factors to the rising generation, trusted recommendations (who is investing in this deal that I trust) and ease of use (online, simple, fast).

Groups like RealtyShares had a popular product, their struggles were from operations.

What about blockchain (or distributed ledger technology – DLT)? Do you expect wide adoption? And, if so, how soon?

Jeremy Neilson: Blockchain/DLT is an attractive concept but wide adoption is not likely for many years because of the clunky nature of the blockchain … The fact that DLT is not necessary but is a nice to have and because the potential features are futuristic.

Broad use is unlikely until Blockchain/DLT is easier to use and with more features than the current system.

What about liquidity for these alternative investments?

Jeremy Neilson: Alternative investments have zero or limited liquidity options.

Depending on the asset class, liquidity could occur sooner or later.

For example, real estate investments tend to have shorter liquidation horizons then an investment into an early-stage technology company.

Big News: Leading Crowdfunding Platform SeedInvest Receives ATS Approval From FINRA, will Add Secondary Trading for Private Securities

SeedInvest, one of the leading US-based investment crowdfunding platforms, has received regulatory approval from FINRA to operate a secondary marketplace for securities via an alternative trading system (ATS). SeedInvest is the first traditional crowdfunding platform to receive an ATS license.

Providing liquidity for private securities in a regulated marketplace is on the list of just about every online capital formation platform. The SeedInvest news is significant for the platform as well as the industry. SeedInvest was already a registered Broker-Dealer, a requirement to receive an ATS license.

Ryan Feit, co-founder and CEO of SeedInvest, commented on the announcement:

“Liquidity remains a key missing piece towards democratizing the private capital markets. Creating a truly vibrant secondary market for private company shares has the potential to make startup investing a significantly more attractive asset class.”

Feit, in a recent interview, foreshadowed the announcement stating his ambition to launch a secondary marketplace for securities issued on their platform. Currently, SeedInvest issues securities using the full stack of exemptions including Reg A+, Reg CF and Reg D. Notably, under Reg A+, the security may trade immediately following its issuance.

Feit also mentioned his ambition to raise capital for issuers globally while accepting investors from around the world. SeedInvest has already raised capital for issuers based outside the US.

SeedInvest reports over 250,000 registered investors with approximately 50,000 of those individuals being accredited. SeedInvest also integrates with established VC firms and angel investors who participate in some of their offerings. SeedInvest is a highly selective crowdfunding platform and only accepts a small fraction of issuers who apply to raise capital on their platform.

By launching an ATS, SeedInvest will take an important next step in providing liquidity to traditionally ill-liquid securities which historically have depended on an acquisition or initial public offering to provide an exit opportunity for early investors.

SeedInvest, which was acquired by crypto-centric firm Circle last year, added that gaining the ATS license was part of “realizing Circle’s longer-term vision.”

Jeremy Allaire, co-founder and CEO of Circle, said they are empowering individuals to create and share value in ways the are more inclusive, open and efficient.

“ATS approval for SeedInvest sets us on a path to develop secondary trading marketplaces and to facilitate liquidity for private securities, which together hold the promise of significantly democratizing private capital markets,” said Allaire.

SeedInvest did not announce the launch date of the secondary marketplace but expectations are for the trading venue to go live at some point in 2019.

The most recent list of approved ATSs, minus SeedInvest, is available here.

SeedInvest Plans Secondary Market & International Expansion

SeedInvest, an online capital formation platform that claims over 250,000 registered investors (50,000 accredited), is planning a significant expansion.

SeedInvest is a full stack crowdfunding platform leveraging all three securities exemptions to raise capital online from seed stage an up.

In the fall of 2018, SeedInvest announced its acquisition by Circle – a digital asset ecosystem that has raised about $250 million from big-name investors. The marriage of the two companies combines Circle’s regulated digital asset marketplace with a primary issuance platform that is also a broker-dealer. The deal received FINRA approval this past March.

A recent interview by Security Token Academy provided some additional insight into the future of the two platforms. SeedInvest co-founder and CEO Ryan Feit said that a secondary marketplace for their issuers in the making – perhaps by the end of the year. Additionally, SeedInvest plans an international expansion including Europe and Asia at some point in the future.

SeedInvest has already facilitated multiple international issuers – some in partnership with UK based CrowdCube. But the benefit of securities on blockchain is the ability to code characteristics and compliance into the security thus streamlining global offerings and liquidity. In multiple jurisdictions outside the US, this is already in the works.

Liquidity in early-stage companies with few shareholders is historically quite difficult for investors seeking an exit before a liquidity event such as an IPO or acquisition. Digital asset exchanges may be the missing variable to addressing this enigma.

Feit also said that SeedInvest will be expanding into other asset classes without mentioning them specifically.

Real estate is one of the most frequent asset classes that is predicted to benefit from blockchain tech but other, non-traditional assets, such as art, wine, and more, have been discussed.

Feit said it was “business as usual” with a lot on the roadmap over the next 5 to 7 years.

Regarding the JOBS Act and the three crowdfunding securities exemptions available in the US, Feit views it, as it stands today, as a “minimum viable product” with a lot of things that need to be fixed.

“It’s a patchwork … far from perfect,” Feit says of existing securities law. He hopes to work with policymakers to address these shortcomings.

The promise of what blockchain can facilitate over the next few years is “really inspiring,” says Feit. He foresees a world where online capital formation will look more like AirBnB and Amazon than Nasdaq in the future. This new world vision may be a few short years away.

FINRA Approves Circle’s Acquisition of SeedInvest, Continues Mission of Tokenization

FINRA has given their stamp of approval to the acquisition of SeedInvest by Circle. The crypto focused company announced the purchase of SeedInvest in October of 2018.  The acquisition of a regulated securities crowdfunding platform by the blockchain based Circle represented a seminal turning point in the crypto industry.

Circle said the acquisition will bring their company closer to “weaving crypto assets/blockchain technology and traditional forms of financial contracts such as equities and other securities.” Circle has been a vocal advocate of the tokenization of both traditional assets and non-traditional investments such as art and more.

SeedInvest, one of the larger full stack crowdfunding platforms in the US, will continue to operate as they do today but with additional support from Circle. SeedInvest will be joining Circle’s team of over 300 people and global customer base of more than 8.5 million individuals including over 1,000 institutions.

Circle said it will continue to work closely with regulators such as FINRA and the Securities and Exchange Commission as digital assets continue to evolve.

In a blog post, Circle co-founders Jeremy Allaire and Sean Neville said they intend on creating new options for both startups and growth companies while providing unique access for retail investors.

“Broadly, we aspire to bring the economic and technical breakthroughs of crypto assets and blockchain technology to traditional forms of financial contracts such as equities and other securities. We believe that the tokenization of financial assets will ultimately unlock capital for growing companies and investment opportunities for people everywhere. Over time, more functions of private equity will be tokenized — including voting and governance, dividend payouts, and other economic features. Tokenization will also create new opportunities for businesses to build better relationships with their customers by leveraging tokens linked to ecosystem behaviors,” said Allaire and Neville.

Circle has received significant venture funding – including money from Goldman Sachs. This is not the first acquisition by Circle. In February 2018, Circle acquired crypto exchange Poloniex for a reported $400 million.

Report: Steeply Discounted Circle Shares for Sale on SharesPost

Private shares for “global crypto finance company” Circle that sold in a Series E fundraise last May for $16.23 each are reportedly available for sale on SharesPost now for $3.80, The Block reports.

The May raise put Circle’s valuation at $3.01 billion.

Though The Block says it could not determine how many shares are being sold currently at the discounted price, if the price reflects market, that would place the total value of Circle’s shares at around $705 million.

Circle was recently named as one of Forbes “Fintech 50” companies and was valued in that article at $3 billion.

An unnamed UK-based crypto hedge funder reportedly told The Block that low price on SharesPost may be resulting from a perfect storm of factors:

“[I] reckon it’s a combination of liquidity discount applied to private companies + crypto bear market + Circle getting absolutely killed on write down of acquisitions + bear market volumes.”

Circle acquired the crypto exchange Poloniex in 2018, but trade volumes there and elsewhere are reportedly way down. Notably, Circle acquired prominent US-based investment crowdfunding platform SeedInvest in late 2018 for an undisclosed amount.

Diar has reported that trading on the world’s top crypto exchange, Binance, is currently down 40% since December 2018).

Binance is still reportedly handling $520 million USD per day in crypto trades, but Poloniex handles less than $7 million- about 5 times less than it rival Coinbase, which does a reported $37 million USD per day in crypto trades.

Circle CEOs Jeremy Allaire and Sean Neville, however, recently wrote that business is strong at Circle’s over-the-counter trading desk, Circle Trade, which the founders say handled more than $24 billion in crypto trade volume despite bear market conditions in 2018.

The two also claim to have, “onboarded a record number of new institutional clients…(grown) our trading operations to 24/7 with coverage in the US, Europe and Asia, and added significant workflow improvements, including the launch of our RFQ Electronic API.”

Some commentators reportedly find the discounted Circle share offering baffling given those claims.

According to “an executive at a rival exchange,” news of Circle’s discounted share price:

“Doesn’t make sense at all. They have mentioned staggering volumes growth.”

Another crypto exchange executive added:

“Circle Trade is the biggest profit earner — could be the majority of profits…(but) the OTC space is generally getting more competitive, margins are down.”

Circle could not be reached for comment by press time.

Digital Brands Group: DSTLD Transatlantic Crowdfunding Round Closes at $3.2 Million , Plans IPO on AIM for March

Digital Brands Group (DGB), a “digital-first clothing & lifestyle brands” best known for DSTLD, has closed on its most recent securities crowdfunding round. DSTLD / DGB raised $3.2 million in a transatlantic investment offering. US based SeedInvest leveraged its ongoing relationship with UK based Crowdcube to allow investors in both countries to back the early stage fashion firm. The preferred equity offering was selling shares in the compay at a pre-money valuation of $35 million. In the US, DGB used the Reg A+ securities exemption seeking to raise up to $10 millionn. In the UK, there is no alphabet soup of offering structures – you just need to file a prospectus once you raise over €8 million.

In many ways, DSTLD is indicative of the future of cross-market securities offerings enabled by investment crowdfunding platforms that leverage their compliant platforms to list offerings in young companies – especially those with a retail facing service or product. Investors are less concerned about the jurisdiction of the offering than prospects for the company. The UK and US share many market characteristics and thus represent an opportunity for firms lookingn to expand their market exposure.

DSTLD is an LA-based brand that has cut out the middle man to offer high-quality clothing minus the high cost. Starting first with jeans for both women and men, DSTLD has since migrated into other clothing segments including shirts and coats plus accessories for the direct to consumer business. Last December, was their best month ever generating $1.1 million in sales.

DSTLD was Digital Brands Group first brand but recently the company added Ace Suits, a menswear site, as a complementary clothing vertical. Men may order suits online that use Italian fabric which are crafted in Turkey.

Digital Brands Group intends on acquiring one to two new brands each year becoming a portfolio holding company driving scale by leveraging in house expertise. As DGB purchases more brads they hope the value of shares will rise.

Of note is the fact that the company is planning on initial public offering (IPO) on the AIM in March. AIM is the junior market of the London Stock Exchange. AIM claims to be the most successful growth market in the world. Since AIM launched in 1995, more than 3,600 global companies have listed on AIM.

Digital Brands Group CEO Hil Davis says AIM is what NASDAQ used to be back in the day. It is interesting that the US-based exchanges & marketplaces lost out to the listing for London.

A recent presentation by Davis sheds light on the decision making process. Davis says that AIM is all about small-cap offerings. NASDAQ is good if you have a market cap of $250 million or more, but they aren’t they aren’t there yet. Maybe someday.

Davis is sensitive about listing shares at too high of a valuation too and he points to companies that made that mistake. This is good to hear. Too frequently, small companies have outlandish expectations as to their valuation and early investors can be the loser in that equation.

DBG says the IPO valuation will be post money and perhaps more – as the company may be queuing up an acquisition in advance. Of course, you will not know until the offering is prepped by the bankers.

If you are an investor, once DBG lists on AIM your shares will be tradable and thus you will have liquidity so you may sell – or hold.

DBG / DSTLD is a crowdfunding issuer to watch. Depending on how the AIM listing goes other issuers may follow. And perhaps, US-based exchanges and US policymakers will take a closer look at what the UK – AIM is doing correctly.

We are looking forward to March.

Reg CF Closes the Year at $161.5 Million in Crowdfunding. Total for 2018 was Flat versus Year Prior

The StartEngine Index tracking Reg CF crowdfunding issuers was published a few days ago. According to StartEngine, total successful offerings since the securities exemption was launched in May of 2016 now stands at $161.5 million.

So how does 2018 compare to the year prior? Excellent question.

During 2018, issuers raised $75.8 million. In 2017, issuers raised $72 million. Barely a bump higher.

In December, issuers raised $5.1 million a bit less than in November – a tepid month.

The Index reports that 732 companies launched Reg CF offerings in 2018. Out of this number, StartEngine launched the most with 252 campaigns. Wefunder launched 158 offerings in 2018, and SeedInvest 65.

StartEngine does not share successful offerings which are probably a better metric.

The most popular industry to use Reg CF is Food & Beverage. Obviously the fact it is consumer-facing helps. During 2018, $17.4 million was raised followed by Technology ($8.1 million), Media & Entertainment ($5.4 million), and Blockchain ($4.9 million).

California ($21.8 million) was the top state to use the exemption followed by Texas ($8.6 million) followed by New York state ($8.2 million).

Overall, 19 companies raised the maximum amount of $1.07 million in 2018.

Many companies that want to raise more than this amount have been using side by side Reg D/Reg CF offerings. Perhaps a bit clumsy but effective.

Reg CF is the smallest of the three investment crowdfunding exemptions:

  • Reg D 506c is accredited crowdfunding where you can raise as much as you want
  • Reg A+ requires significant disclosures similar to a “mini-IPO” but companies may raise up to $50 million
  • Reg CF issuers can raise $1.07 million via a regulated funding portal or broker-dealer while providing different tiers of ongoing disclosure.

The fact that Reg CF has experienced muted growth is indicative of the shortcomings of the exemption.

Reg CF regulations were created by a combination of Congressional statute and rulemaking by the Securities and Exchange Commission (SEC). It is clear that few of these policymakers engaged in the rulemaking process spent time in the real world of early-stage funding. A non-sensical cap of $1.07 million (which the SEC could change to something more reasonable without Congress) and a litany of compliance fouls have hobbled the exemption while adding excessive cost. That being said, it is a credit to the platforms that use Reg CF as it is a bit of a mess yet some issuers are using it to raise growth capital with the help of the portals.

Will Congress revisit Reg CF in 2019? Or will the Commission act and use their authority to help the little guy? Let’s hope so.

Digital Asset Platform Circle Reports 200 Million Transactions for $75 Billion in Value During 2018

Digital asset platform Circle has published interesting insight into platform performance during 2018. According to the company, 2018 was a “whirlwind of a year.”

Circle states that they currently serve over 8 million customers from all around the world. Transactions totaled $75 billion during the year (200 million transactions) with customers from every country in the world (195).

The modern spin on financial services that offers both crypto and more traditional services is growing rapidly. Circle foresees “an open internet of finance that will transform and integrate the world more deeply, eventually eliminating artificial economic borders and enabling a more efficient and inclusive global marketplace that connects every person on the planet.”

Customer activity was segregated as follows:

  • United States – 30%
  • Europe including the UK – 25%
  • Asia – 24%
  • Middle East, Africa plus America’s minus the US – 21%

Circle now claims over 1000 institutional clients that compliment its retail services.

During the year, Circle made several important acquisitions.

Crypto exchange Poloniex, one of the largest acquisitions in the youthful crypto industry, has apparently been successfully integrated into the Circle portfolio of services.

SeedInvest, a top investment crowdfunding platform, will become Circle’s lead on the tokenization of securities. SeedInvest is also a broker-dealer.

Circle explained the vision behind the SeedInvest purchase:

” … we believe more traditional assets will become securitized through tokenization, and that includes shares in companies, debt and other lending contracts, and other forms of property and value … a vision where capital formation can be achieved for businesses of all sizes over the internet using open and interoperable financial rails, with access to invest in these businesses and securities offered to retail and institutional investors globally through open digital asset markets.”

Some other highlights of interest:

  • Circle Invest – provides “crypto without the cryptic” for retail investors
  • Circle Trade – an OTC business for institutional investors generating $24 billion in transactions during the year
  • Circle Pay – a payments platform for several million customers in the UK, US, and EU
  • USDC – a stablecoin with one of the largest market caps (about $280 million) created in conjunction with Coinbase

As a leading crypto platform, Circle has established a leading policy voice for the industry.

Circle has directly engaged with federal agencies such as the CFTC and the SEC as well as global regulators such as the UK FCA and the Monetary Authority of Singapore. Circle helped to create the Blockchain Association while becoming a founding member of the Global Digital Finance group and helping to create their code of conduct.

In many respects, Circle represents a holistic view of financial services of the future. Unencumbered by the ball and chain of too many physical locations but clearly global in service and perspective, Circle wants to provide a portfolio of Fintech services to everyone anywhere.

During the summer of 2018, it was reported that Circle was considering applying for a banking license. Perhaps in 2019 we can expect an announcement of the launch of Circle Bank?

HyperSciences’ Crowdcube/SeedInvest Campaign for Hypervelocity Tech Takes Off

HyperSciences, a creator of innovative technology that has the potential to access geothermal energy, speed up infrastructure projects, and make energy drilling safer and faster, is now overfunding on Crowdcube.  The US company has raised over £3,168,950 for 13.87% equity from more than 138 investors on Crowdcube and SeedInvest, easily surpassing its initial £1,963,140 target goal.

[easy-tweet tweet=”Now Overfunding: @HyperSciences @seedinvest @crowdcube for Hyperdrill, Geothermal Electric and Hyper Tunneling Machine”]

Pre-money valued at £19,631,400 with R&D funded by NASA and Shell, HyperSciences is poised to disrupt several major industries. Founded by CEO Mark Russell, the company already has 31 patents at various stages of application globally.

“Our hypersonic engine can launch projectiles left, right, up, or down at velocities greater than five times the speed of sound. When we accelerate these projectiles towards a rock face, we pulverize hard rock. When we accelerate them upwards, they can reach the suborbital atmosphere,” commented the campaign. “We are positioned to help the energy, tunneling, and aerospace industries accomplish their goals with the next generation of equipment. Our technology is designed to reach previously inaccessible geothermal deposits and by converting heat into electricity, we can produce clean energy anywhere.”

When applied to tunneling, Texas-based HyperSciences expects to cover up to a mile a week, ideally completing projects at a fraction of the cost of conventional drilling. The firm has also shifted its gaze to the upper atmosphere, securing a revenue contract with NASA to continue development on its technology.

The HyperScience team is lead by Founder and CEO Russell, who holds a Master’s from Stanford University in Aero/Astro Engineering and is the former lead engineer for Jeff Bezos’ Blue Origin; COO Raymond Kaminski, VP of Business Development Chuck Russell and VP of Finance Jay Holtz.

For more campaign details, click here. 115 days remain on the Hypersciences’ campaign.



DSTLD Follows Successful SeedInvest Raises with Yet Another Successful Raise… Live on Crowdcube

In October Digital Brands Group, a curated group of digital-first lifestyle brands and the parent company to Direct2Consumer brand DSTLD, secured more than $1 million in investments after only five days into its Reg A+ campaign on SeedInvest, the company’s second equity crowdfunding round with SeedInvest with more than $4.5M previously raised through the fund-raising platform. In 2016, DSTLD raised money through Regulation A+ Equity Crowdfunding and has raised $6.5MM+ in capital from customers and brand advocates to date.

Now the company has shifted overseas and partnered with UK-based Crowdcube in order to secure additional funds to accelerate the Group’s continued expansion including plans to establish its flagship brand, DSTLD, in the UK market.

“The Group was able to launch SeedInvest in early October and Crowdcube in late October because there is a cross-border relationship between the platforms that the company was able to leverage from,”  The Group explained to CI regarding the nearly simultaneous raises.

Third time’s a charm…

[easy-tweet tweet=”Looking Good: Successful Rounds @dstld @seedinvest @crowdcube”]

Pre-money valued at £26,842,755, LA-based Digital Brands Group is officially overfunding on its third — and most successful– crowdfunding campaign, having already raised over £1,375,315 by 447%+; its initial target goal was £306,770 for 4.87% equity.  Over 280 investors have joined the round to date.

“Our first international round of fundraising marks a very exciting milestone for Digital Brands Group as we continue to deliver our ambitious growth plans. We have seen first hand how powerful it can be to raise funds from those who wear, buy, and love our products. We are delighted to be launching funding in the UK as we look to expand our brands and product into new markets,” noted Digital Brands Group CEO Hil Davis.  “The fundraising not only supports our long term brand awareness strategy here in the UK, with DSTLD due to land in the UK in 2019. It also provides the UK public and investors with an exciting opportunity to be part of our growth story from the ground up.”

Crowdcube funds will support the Group in executing its build and buy strategy, with a plan to add further new fast growing, digitally-native lifestyle and fashion brands to its platform.

“The funds raised will be used to accelerate the Group’s expansion plans, which include establishing its flagship brand, DSTLD, in the UK market in 2019 as well as support the Group in executing its ‘build and buy’ strategy that will see it acquire one to two fast growing, digitally-native lifestyle and fashion brands to its platform per year,” shared The Group when CI asked about how the additional funding will be utilized.

All brands on the platform will have a digital-first focus in addition to an omni-channel customer experience, which will include showrooms, pop-ups and partnerships with retail brands and department stores.

[easy-tweet tweet=”‘As you may know, this is our third equity crowdfunding raise, and so far our most successful…’ @dstld @crowdcube”]

Digital Brands Group’s vision is led by co-founders Corey Epstein and Mark Lynn, CEO Davis and CFO Kevin Morris. The Group’s executive management team has experience building and scaling direct brands (DSTLD, Winc.com, J. Hilburn) from the ground up to well over $150M in combined revenue.

Digital Brands Group aims to develop and acquire like-minded and fast growing direct-to-consumer brands into one portfolio. The brands’ leverage shared resources that support and market their products, while maintaining and creating their own unique customer values and identities. Digital Brands Group utilizes this model in order to drive down fixed costs, fuel innovation, support the customer experience and ultimately drive down prices for consumers.

“The world of retail is moving more and more towards e-commerce led and direct-to-consumer models and we already have two very exciting brands in our portfolio,” added Davis. “DSTLD is increasingly establishing itself as a disruptive, premium denim brand in the US market with widespread industry and celebrity endorsement.”

DSTLD, pronounced “distilled”, the LA-based premium denim brand, has been worn by celebrities including Alessandra Ambrosio, Sofia Richie and Cara Delevingne. DSTLD designs and delivers premium denim and luxury essentials without retail mark-up thanks to its direct-to-consumer business model. Since its launch in 2014, DSTLD’s total revenue has recently surpassed $17 million as a result of its growing online presence and pop up showrooms. The brand currently counts 77K+ customers.

DSTLD designs and delivers premium denim and luxury essentials without retail mark-up, offering premium product for about 1/3 the traditional premium cost, thanks to its direct-to-consumer business model.  All of DSTLD’s products are produced in the most sought-after facilities in North America, Turkey and Italy utilising the finest materials from Japan, Italy, and the United States.

The Group plans to add its second brand to the portfolio with the launch of ACE Studios, a luxury performance suiting and sportswear brand, this December. For more detailed regarding Digital Brands Group’s newest fundraise, please click here. 26 days remain on the Group’s Crowdcube campaign.