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The Protocol Newsletter Issuer Spotlight: SPiCE VC

Read the latest edition of the Protocol Newsletter featuring Tal Elyashiv, Co-Founder & Managing Partner of SPiCE VC. Tal is one of the original founders and visionaries for digital securities and tokenized VC funds.

1. What is SPiCE VC and what makes it unique compared to other VC firms?

SPiCE is a Venture Capital fund that gives investors exposure to the massive growth in the Blockchain and tokenization ecosystem.

We invest in companies that are building the blockchain ecosystem with winning products and services that have strong teams capable of executing on their vision and leading in their domain. We look for companies that stand to benefit the most from the massive growth of the industry.

As early founders and visionaries of the digital securities ecosystem ourselves, we come from within the very industry/ecosystem in which we invest. This allows us great access to deals and insights into the ecosystem and technologies involved and to date we’ve had good success.

SPiCE is also the first fully tokenized VC fund, thereby allowing investors to participate and benefit in an asset class that would otherwise likely be inaccessible to them.

2. How did you personally get started in the blockchain industry, and specifically using the technology to evolve financial products like digital securities and tokenized VC funds?

When we started SPiCE VC we were looking for a way to solve the main problem of the VC industry, which is illiquidity for the LPs. VC funds typically stay illiquid for a very long time, often well over 7-10 years. We wanted to allow investors in the fund early access to liquidity, and create a way for portfolio asset appreciation to be real, not just “on paper” as it is with traditional VC funds (until exits start happening).

Back in 2017 we witnessed the ICO boom (which we knew would be curtailed by regulators eventually) and thought that using similar DLT/Blockchain concepts, but in a fully regulated, compliant way to jurisdictional security regulations, could provide some of what we were looking for. We realized at that time, of course, that it would require more ecosystem components to be developed, like exchanges, etc., but decided to launch SPiCE knowing that these components would eventually come online.

We started building the technology for SPiCE but very quickly realized that what we were doing was too important from a foundational perspective for this new industry to be “buried” inside a VC fund. So we took the technology and spun off Securitize. The rest, as they say, is history...

3. What were some of the challenges and advantages of raising money for a tokenized VC fund?

When we were raising our first closing, back at the end of 2017/early 2018, it seemed like a crypto-related crazy idea to many investors and institutional investors had no appetite for investing in this domain. On the other hand, many crypto investors were not interested in diversifying out of cryptocurrencies into the VC realm.

So back then most of our investors were funds of funds, angel funds, family offices, and High Net Worth individuals that wanted exposure to the blockchain industry.

The regulatory acceptance in many jurisdictions was not clear yet to investors and the concept of digital securities was not familiar to most investors. That meant a lot of explaining…

Today, embarking on our second fundraising (into the same fund) we are mostly talking with institutional investors and family offices as the appetite for blockchain exposure has grown significantly. Investors are much more familiar and comfortable with the concept of digital securities. In addition, SPiCE VC has become a recognized brand while the regulatory environment has become very clear.

4. SPiCE VC and Securitize will forever be linked thanks to the relationship of their respective founders, how has this helped and/or hindered both companies?

This has helped both companies in many ways. First, SPiCE was the first client to launch on the Securitize platform and has since then executed many “firsts” on the platform. This has helped Securitize build a deeper understanding and foresight early in the game for what is needed in order to succeed and what clients require over time.

It also gives SPiCE greater insight into the digital securities ecosystem and its players in the ever-changing map of the ecosystem. The proximity to a successful company like Securitize allows us to develop a better ability to separate what’s real from what sounds cool, as well as constantly update our future vision for the industry.

5. SPiCE VC has always looked to evolve the traditional VC model with features like publically disclosing its NAV. What other types of innovation are possible for funds using digital securities in the future?

Creating more transparency through quarterly NAV reports was indeed something that was important for us early on. Direct and more frequent communication with all our investors is something that we see going hand in hand with this transparency (and can use the platform to do that). Adding the ability for investors to vote on certain issues/decisions is also an innovation that we see coming.

Beyond that, easy distribution of proceeds directly to investors through their digital securities is another.

For larger investors, co-investment opportunities may be an interesting option as well.

6. With your position at SPiCE VC, you’ve had a front-row seat for the evolution of the blockchain industry. How do the kinds of companies you were seeing in late 2017 differ from the companies you see today?

Back in 2017, I saw a lot of “cool” ideas, many of which (not all, of course) had no real business case or business need/feasibility. A lot, perhaps due to the newness of the concepts, and perhaps influenced by the ease of raising money with little scrutiny during the “busy ICO” days.

Also, a lot of the early companies were focused on consumers/retail.

Since then the ecosystem has matured somewhat and real business started to evolve. At the same time, large corporations and institutions began adopting the concepts and investing in the ecosystem while developing business and technology capabilities based on DLT. And, in parallel, the regulatory environment became much clearer, which paved the way for many large players to step into the game.

Today, most large financial institutions, banks, capital market players, payment companies etc, as well as central banks (through CBDC) are dealing with DLT concepts. And, many more industries started moving towards adopting Blockchain/DLT as well - like shipping, healthcare, security, supply chain management, etc.

That’s a lot of growth and adoption in just over 3 years…

Obviously, as a result, the players in the ecosystem are different, there are many more investment opportunities across more verticals, and the business opportunities for the ventures in the ecosystem are much greater as a result.

However, at the same time, we also know much more about the complexities involved. There are many more DLT concepts and technologies involved trying to adapt to specific needs of industries, and to global issues like scale, processing speed, regulatory compliance, etc. So investment in the ecosystem requires much more knowledge and understanding.

7. From your perspective, will traditional financial institutions adopt blockchain and “crypto” technologies by forcing a fit into existing infrastructure, or is this a case where blockchain and “crypto” technology will replace traditional financial infrastructure on its own terms?

Without a doubt - yes. DLT is here to stay and many industries are already investing significantly in it. I also believe that it will impact significantly all transactional industries and that the adoption cycle will be significantly shorter than we have seen in previous technological revolutions. I believe that DLT will become mainstream in the financial industry on all its verticals within 10-15 years. This is a huge industry, and 15 years is a very short time if you compare it to the internet revolution for example (over 40 years and going…)

8. Do you think that that the price of Bitcoin is a harbinger for the entire blockchain industry? If so, why, and what are the challenges of that reality for things like digital securities?

I don't think so. Bitcoin brought DLT to our collective radar screen. Bitcoin’s growth and price appreciation helped ground the concepts as something worth looking at and understanding the value of.

But today, DLT’s value as a technology that is fundamentally a game-changer in all transactional industries is well recognized and the ongoing transformation and adoption in these industries is already propelled on its own merit. Unrelated to Bitcoin or how it will perform.

9. What part of the technological ecosystem is most in need of an upgrade in order for blockchain-technology-powered finance to go mainstream? How about the other areas such as regulatory, services, etc.?

Regulations are evolving quickly in Asia and Europe. The US who is leading with regulation related to digital securities is still behind on some other aspects of blockchain-related finance, but hopefully, the gap will be closed within the next year or two.

There are still many technology-related issues to resolve/overcome - the user experience, scalability, security, standards, etc. It is very likely that different DLT solutions will develop to answer the unique needs of different industries.

There are many debates still on private/public permissioned/no permissioned blockchains etc.

But this is very typical for a technology that is early in its adoption cycle and that is evolving so rapidly. These issues, as well all regulatory issues will sort themselves out over the next 10 years.

Specifically, in the digital securities ecosystem, it is clear that the reliance on the Ethereum network (the best choice available when the ecosystem started) for digital securities in its current form is not going to work. This is due to transaction cost, scale, and speed issues, to name a few. There are multiple possible alternatives that have matured to a level they can be used, and time will tell which underlying DLT will be the main conduit(s) in this ecosystem.

10. What does the tokenized VC industry look like in 5 years?

Within 5 years we will see good liquidity in the trading of tokenized VC funds (actually, much earlier than that), and also much deeper interaction with investors and more transparency. But more importantly, I believe that a much larger portion of the VC industry will be tokenized.

About SPiCE VC

SPiCE VC is a Venture Capital fund providing investors exposure to the massive growth of the blockchain/tokenization ecosystem. SPiCE invests globally in platforms and ecosystem providers enabling access to capital markets, banking, real estate, and other industries enhanced through Blockchain technologies. The fund focuses on companies who stand to benefit the most from the massive growth of the industry. Combining institutional know-how, hands-on management, entrepreneurial innovation and professional investment experience SPiCE’s management team has been involved in hundreds of tech funding rounds totaling billions of dollars; as entrepreneurs, investors, and executives. SPiCE is located in the US, Switzerland, Singapore and Israel. To learn more about SPiCE VC visit www.spicevc.com or email Tal Elyashiv, Founder and Managing Partner, at tal@spicevc.com.

About Securitize

Securitize is reinventing private capital markets by delivering trusted end-to-end security token solutions that leverage our leading blockchain technology, which increases access to private markets for eligible investors while simultaneously making them more efficient, compliant, and liquid. Securitize is an SEC-registered transfer agent and its subsidiary, Securitize Markets, LLC, is an SEC and FINRA registered broker-dealer and alternative trading system (ATS).

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