Panxora Digital Ventures, part of the Panxora Group today launched its hybrid seed funding solution to stimulate the stagnant capital market for new blockchain token projects. Panxora’s hybrid model creates a two-stage fundraising process that bridges the gap between seed investors’ interests and token founders’ needs to produce win-win results.
The poor return on investment and deteriorating risk/reward profile for crypto projects means investors have become less willing to commit capital to new token projects. Investors expect a clear vision of how they can make a return, and often seek a significant equity slice in exchange for funding. At the same time, tighter legal frameworks and skyrocketing marketing costs are making token launches whether ICOs or IEOs far more expensive, increasing founders’ demand for financing.
Gavin Smith, CEO at Panxora, says: “Our hybrid offering provides blockchain project founders and investors alike with a professional solution to the challenges they face. Investors see our hybrid methodology not only as a structure that will improve the performance of projects, but a low-cost way to get involved with promising projects early so they will be well positioned to reap subsequent rewards. Using our hybrid approach, early stage investors can spread their capital across more opportunities and have several different ways to generate an improved return.”
Panxora’s hybrid model resolves founders’ and investors’ demands by splitting the project funding in two, and introducing investment diversification mechanisms to generate additional profit. In the first phase, a special purpose company is formed to raise funds from accredited early stage investors. Sixty percent of this capital is used to finance the utility token launch where the project founders will raise the bulk of the money needed to fund the overall business project.
Thirty percent of the capital is invested in a licensed large cap crypto hedge fund to create extra revenue streams to reward early investors for the risk they assume for their early participation. Seed investors also receive utility tokens at private sale prices and a share in future revenue generated by the token project or in many cases an option to convert this to equity.
Panxora only offers this investment structure for projects where they are making an investment. They provide extra assurance that the project is managed in a fiscally responsible manner by ensuring that two thirds of the funds raised during the token sale are placed in a ‘Governance Account’ held by a FCA regulated custodian KOINE. The Governance Account funds are hedged against cryptocurrency price volatility using proven trading models and released to token founders on the achievement of specified milestones.
At the end of thirty months, the SPV is dissolved and pay outs are made to seed investors including the profit and principal originally invested in the large cap crypto hedge fund. In some cases an option to convert to an equity stake is also possible.
Marcie Terman, COO at Panxora, says: “This type of investment structure while unknown in the cryptocurrency market is common in other alternative investment classes. This makes the hybrid investment structure not only attractive to token investors already committed to the industry, it opens the door to conventional investors who have been looking for their first or second foray into cryptocurrency, just waiting for the right deal to emerge.”