Neufund: the classical financial world vs. the highly disruptive fintech world

Friday 21 September 2018 10:16 CET | Interview

Is it possible to reinvent the way companies are funded? Agnieszka Sarnecka, VP Ventures at Neufund, confirms this and shares with us everything we need to know about equity tokens.

What is Neufund? Can you name some of your competitors? What is the difference between their offerings and yours?

Neufund is a platform for equity fundraising on blockchain. At its core Neufund is a regtech and legal-tech company for primary issuance of security tokens on the Ethereum blockchain. We tokenize company shares and represent them as legally binding smart-contracts. The company was founded exactly 2 years ago in Berlin. Neufund is backed by top European VCs and Business Angels such as KKR, Atlantic Labs, Freigeist Capital, Klaas Kersting (Flaregames) and others. Our company aims to enable Equity Token Offerings for companies world-wide. Still, in the first step we are concentrating mostly on the European market.

Since equity tokens are security tokens, Neufund competes with companies such as Securitize and Harbor. However our solution is structured under European law instead of the US’. Therefore STOs conducted with Neufund are governed by completely different rules than the ones done by our competitors. For example all of our US competitors structure their services only for accredited investors, while Neufund can also market retail investors. This makes our solution more accessible and inclusive.

What are equity tokens and Equity Token Offering (ETOs)?

An equity token is a universal token which can represent the value of any network or any business model. It is a legally binding token representing shareholder rights in off-chain companies. At the same time by tokenizing equity we create technologically enhanced shares which can co-exist with utility tokens and represent a stake in economic output and governance of the network. Equity tokens are security tokens, but are structured as investment assets (Vermögensanlagen).

An ETO is a novel way of fundraising, which allows any kind of company, blockchain-based or not, to issue equity tokens on blockchain, in a public or private placement. An ETO is a hybrid investment model combining advantages of an IPO, an ICO, and a VC round. ETOs can be conducted by any incorporated entity worldwide.

Has there been any company conducting an ETO with Neufund? Can you share some lessons learned?

We have seven companies that tokenize their equity in the upcoming months. You can find out more here. These are mostly off-chain companies in stages from seed to stage D aiming to raise 7 to 9 digit rounds.

The biggest lesson learned is that this particular kind of fundraising has a high demand on the market from both issuers’ and investors’ side. However education is the first and most challenging step. It is a disruptive and highly-innovative method. Nevertheless anyone who digs deeper into the structure realizes that we haven’t reinvented the wheel, we have merely enhanced the typical fundraising process with blockchain technology, making it more efficient, transparent, fair and democratized.

You have recently teamed up with BitBay, Malta Stock Exchange and Binance. How do these partnerships add to the Neufund’s momentum?

With the partnerships you mentioned Neufund is able to create the first complete equity token ecosystem from issuance to secondary trading and liquidity. Companies will be able to offer faster and easier ways of share liquidity. Neufund is talking with multiple other Crypto Exchanges and Stock Exchanges that are very interested into entering the Security Token market.

What does it mean creating a decentralized stock exchange?

At the moment we are on the verge of two worlds: the classical financial world and the highly disruptive and innovative fintech world. On one hand many crypto exchanges have the necessary tech framework to list technologically enhanced financial assets, on the other hand stock exchanges have the legal framework to list them. By combining the strengths of both we are able to create a sustainable and powerful bridge between both worlds. Hence, creating the first ever stock exchange on the blockchain. A decentralized stock exchange run on blockchain. Allowing asset-backed tokens to be listing next to other classical financial assets and allowing technological enhancement of any type of financial assets.

Shifting our attention to cryptocurrencies, what do you consider them: payment tokens, utility tokens, asset tokens, securities? Could you please motivate your answer?

This is a very broad and complex question. There are many types of tokens on the market and in my opinion they shouldn’t be thrown into one basket just because it is difficult to understand their functionalities. A cryptocurrency is a crypto-currency as the name states, this is supposed to be a pure payment token acting as any other currency on the market.

A utility token is supposed to have an actual utility allowing users e.g. to use a specific service, be it a specific product or define a role in a specific ecosystem. Asset backed tokens have to be - as the name already reveals - asset-backed. In this case most of such tokens are security tokens. Here however we should also be careful, classifying all tokens as securities such as stock, can be endangering the market. Some jurisdictions such as Germany have different types of securities which can apply to different tokens depending on the asset they are backed with. All in all, every token should be classified appropriately to their function.

The ICO/ ETO landscape deals with trust issues and lack of regulation. How do you overcome these difficulties?

Since the inception of Neufund our main goal is to create a fully legal and compliant ecosystem for asset-backed token issuance. Through the diligent use of the blockchain technology and a strong legal framework we ensure trust-less and transparent ICOs (in our case ETOs). It is not entirely true that there is no regulation. Many jurisdictions (such as Germany) have regulations in place or are establishing new laws applicable to the innovative technology (such as Malta). The former have to be merely read and applied correctly. The latter have the opportunity to enforce the ecosystem and become the leading jurisdiction for this technology.

About Agnieszka Sarnecka

Agnieszka is Vice-President of Ventures at Neufund and entrepreneur by heart. Having experience with both traditional and crypto investors she specialises in fundraising on blockchain. Agnieszka believes in opening the creativity for good and bridging the gap between inventors and investors. She is speaker at The Family and GrowthCon and was featured in Forbes.

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Keywords: ICO, ETO, Neufund, tokens, cryptocurrency, blockchain, fintech, Agnieszka Sarnecka, funding
Countries: World