Heaptalk, Singapore — When people think about fundraising, what comes to their mind is that a person or a group of conglomerates with a lot of assets (money) puts some of their fresh funds into a company so that the company may scale up. This paradigm appears to be shifting as blockchain introduces the notion of a new method of investing in which investments may be made more inclusive by everyone with a more dependable amount.
Large corporations, such as sovereign wealth funds, are generally the most dominant, allowing them to participate in fund raising exercises in the most promising sectors. They can invest directly to private companies or startups, or through private banks – which obviously only offer deals to well connected families of the ultra rich network. Because they are basically ultra-rich, the deals are very keen to come in.
What about the majority of folks who don’t have that much money? Can they invest in unicorn businesses such as Grab and Gojek?
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The answer is definitely conceivable. According to Oi Yee Choo, Chief of Commercial Officer of ADDX, a digital securities exchange firm (previously known as iStox), is an emerging investment method with blockchain technology backing behind the ADDX Platform, it allows individual investors to participate in private companies through fractional ownership.
The method is also known as fractionalization, somehow it is often get confused with Tokenization, it’s actually different. It is a technique for dividing shares into fractionalized parts (stock-splits into small pieces). Allows investors to invest, even if they only have one or two shares. In this case, neither the broker nor the company cares who owns the share; they can both benefit with little effort. Also if the investor needs to sell or buy it on the exchange, then there’s also no limit to how much they can break it down.
“They don’t really mind whether you own half a share, one share, or two shares. As long as the company accepts, said like I raise 100 shares at one dollar, they don’t care who owns those hundreds. All they want to know is that they have raised funds from 100 people “Oi Yee stated.
Blockchain technology is currently transforming the way startups raise funds and secure investment in a more efficient manner. With digital securities, it is possible to create pre-IPO opportunities with fractional ownership. As for investors, they can manage risk by picking and choosing the companies with goals that align with their own, and they can do so while ignoring the correlation between the public markets and the overall performance of their portfolios. While the startup will be delighted to meet investors pretty fast, even if it is in the cornage, as opposed to the traditional but longer pathway via the hedge funds.
For the Hedge Funds scheme, for example, even the startup in cornage level requires $1 million to raise series funds. Definitely, it takes a long time to connect the startup with the VCs, whether they want to fund it or not. If it is broken down to $50,000 or even smaller fractionalized amounts, then it must be a killer solution for startups with so many individual investors participating where they are not burdened with small investments. The startup can then just focus to realize their vision with the funds.
Oi Yee Choo vast experienced and ADDX journey
Looking back on her 20-year career in the financial and investment sectors, Oi Yee sees that private market trends are becoming more interesting. One of them is how the scaled startups from cornage to the giant company, as they move from the range of pre-unicorn to unicorn to decacorn, such as Gojek and Grab, still remained private for a longer period of time, they had a lot more money to deploy, and might still raising the funds. Imagine, how big it will take?
People can invest; it is another pipe dream. It does seem that in terms of investment, there is one aspect that, in Oi Yee opinion, must be maintained, notably the portfolio management. She and her ADDX team have a vision to provide investors with digital securities by using blockchain and smart contract technology to automate most manual processes in the investment and fundraising life cycle across multiple asset classes, such as VC funds, wholesale bonds, and pre-IPO unicorn shares.
“We fractionalise investments, lowering minimum ticket sizes from US$5 million to US$20,000 so more accredited investors can take part in previously out-of-reach opportunities,” Oi Yee said.
ADDX, which was established in 2017, has a vision to provide fully regulated platform for the issuance, custody, and secondary trading of digital assets, also known as security tokenization, currently under the license of the Monetary Authority of Singapore (MAS).
ADDX had a platform to automate laborious processes in the private markets, allowing authorized investors to lower the minimum investment amount from US$1 million to US$20,000 by using artificial intelligence. Aside from trading securities on the ADDX market, investors may also trade their securities on the ADDX exchange, which settles deals instantaneously, as opposed to the 2 or more working days required on other exchanges. Because of cheaper costs, a lower minimum fundraising barrier, and faster time to issuance, issuers profit from digital securities, which lowers uncertainty in a quickly changing business environment.
The ADDX Platform is built on blockchain technology. The reason behind this is that, first and foremost, it is a well-established protocol that, when implemented in a business model, it will increase the value. This is something that many banks are starting to consider. Because it provides credibility through immutability, transparency, and security, and once deployed, it automates a lot of post-trade. For example, consider a bond, and the coupon payment is received. The smart contract will then declare, “Okay, coupon payment has arrived,” compute who owns the bond, and then automatically pay the coupon to these accounts. It is no longer done by humans. The upshot will be a significant cost reduction.
Building a broad connection
Even though they are building in the midst of a pandemic, ADDX’s global expansion plans are unaffected. Oi Yee admitted that the company’s onboarding process was initially sluggish. For example, what should have been a license in 2020 Q4, they finally finished it in February 2021.
However, her digital securities concept appears to be a widely accepted idea; not only in Singapore or South East Asia, but it has also achieved global recognition. According to Oi Yee, Investors have come from all over the world, including Thailand, Hong Kong, Japan, and China. Representatives from Brazil, the United Kingdom, and the Netherlands are also present. To be more specific, 25% of them are non-Singaporeans.
“So we’re fairly excited because we’ve seen a lot of prospects, and we now have VC funds join. We have a pre-fund, a real estate, a private real estate fund, and we’re going to add more of these, as well as some global partners, in the coming weeks and months. And then, pre-IPO, we’re going to launch one of our pre-IPO firms in two weeks,” Oi Yee said.
Several portfolio companies have currently scaled up using the ADDX platform. Like Mapletree a leading real estate development, investment, capital and property management company headquartered in Singapore. There’s also Unity Funds from China, which has got quite strong fan base in Singapore, and Black Rock Partners.
“We’ve done total 13 transactions, some are still not announced yet. It is across funds and bonds. Our range of sizes some of them are small few hundred thousand but actually the largest one is 30 Million, so we’re actually very proud of that. And we continue to you know, hopefully, find the products that everybody wants to invest in and we can cross that quite soon,” Said Oi Yee.