Canadian bank headquarters stand on Bay Street in Toronto.Brent Lewin/Bloomberg
With online currencies such as bitcoin and ether capturing the imagination of tech-savvy investors, a new Canadian company is looking to give investors exposure to the volatile and fast-moving world of blockchain technology.
NextBlock Global, an investment company that buys cryptocurrencies and invests in companies built using blockchain technology, announced on Monday that it has raised $20-million in its first round of fundraising.
Chief executive and founder Alex Tapscott, a former Canacord Genuity investment banker and co-author of the widely-reviewed book Blockchain Revolution, said the company's goal is to help finance, and profit from, a fundamental shift in the way the Internet works.
The transformation is rooted in blockchain, a type of digital ledger book, hosted on millions of servers worldwide, that records transactions using contracts made up of unique computer code. Blockchain is the technology that enables payment using online currencies such as bitcoin. Proponents of the technology say it can also be used to transfer pretty much anything of value, from property deeds to company shares.
"We think that blockchain platforms are becoming the new infrastructure of the Internet," said Mr. Tapscott, who co-founded the Toronto-based Blockchain Research Institute with his father, technology guru and businessman Don Tapscott. "It's like if someone came to you in 1993, and said I've got something called the Internet. Today, buying into blockchain platforms is like buying part of the Internet in 1993."
The company will invest in three aspects of the blockchain world: online currencies such as bitcoin, blockchain hosting platforms such as Ethereum and online apps that are built on such platforms.
"We realized the best entrepreneurs, developers and engineers working in the blockchain field are not going to traditional venture capital to raise money. They don't have to," said Mr.Tapscott. Instead, they raise money by selling online "coins" or "tokens" that are used to access, and run, their technology, he said. It's this digital infrastructure itself – the unique pieces of code that make up blockchain contracts – that NextBlock plans to buy.
The company's launch comes amidst rapid growth in the blockchain industry. A year ago, the whole market for digital currencies was around $10-billion (U.S.), Mr. Tapscott said. It's now worth upwards of $85-billion, he said. In a 2015 survey of more than 800 technology executives and experts conducted by the Global Economic Forum, 58 per cent of respondents believed that 10 per cent of global GDP would be stored on blockchain technology by 2027. Seventy-three per cent believed that governments around the world would start collecting taxes using blockchain technology by 2023.
NextBlock's funding announcement also comes a week after a decision from The U.S. Securities Exchange Commission that new coin issues from blockchain companies will be treated like other securities. Bitcoins are "mined" by computer programs and function as both currency used in online transactions as well as a kind of share in the company issuing them. The new rules from the SEC means U.S. companies wanting to issue blockchain-enabled coins or tokens will have to follow stricter disclosure rules, something Mr. Tapscott said will help professionalize the industry.
Mr. Tapscott said his company is only the fourth or fifth fund in the world to focus exclusively on blockchain investments, and the first of its kind in Canada. The initial $20-million came from a number of institutional investors and hedge funds looking for blockchain exposure without getting directly into the market, Mr Tapscott said. He plans to raise a further $50-million within the next six months, and hopes to have $1-billion in assets under management within two years.