LONDON (Reuters) – Some of Europe’s biggest venture capital firms are buying into sales of new virtual coins or asking their investors to give them the freedom to do so, in a sign of mainstream investor backing for the booming but controversial crowd-funding tool. Germany’s HV Holtzbrinck Ventures, which has more than 1 billion euros ($1.23 billion) under management, is talking to its investors about changing the terms of its next fund so it can buy tokens directly, Jan Miczaika, a partner at the firm, told Reuters.
Lakestar, the Zurich-based firm run by Klaus Hommels, has made at least four investments in crypto and blockchain-related businesses since early 2017, among them ShapeShift, an exchange, and Blockchain, a wallet provider, and it is preparing to invest in a combination of coin and equity stakes in more. Smaller and newer funds like BlueYard Capital and Fabric Ventures are focusing specifically on investments around blockchain – a distributed ledger technology that can remove the need for centralizing institutions – often by buying virtual coins.
Venture capitalists usually take equity stakes in start-ups, gaining a say in how the company is run and legal and governance certainties over their investments. Buying into initial coin offerings (ICOs), as the sale of digital tokens is known, can be far more risky.
They offer little more than a promise the tokens will be worth more in future. But with hundreds of start-ups – ICOs last year raised $6.3 billion – seeking to raise capital for new projects, investors say that to gain access to cutting-edge technology they need the flexibility to compete.
“It’s the internet in the early 1990s, you have to experiment,” said Nicolas Brand, a partner at Lakestar. “I have to find the best way of backing the best entrepreneurs and we need to be agile in how we invest.” Regulators have raised serious questions about the transparency of ICOs and the risks of scams, although authorities in countries from Switzerland to France have disclosed plans to attract new launches. Read more from reuters.com…
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