First Stage Investor

Circle Opens the Door for SeedInvest

Circle Opens the Door for SeedInvest
By Andy Gordon
Date March 11, 2019

Circle’s purchase of SeedInvest became official last week. Last Monday, Circle (a crypto finance company) announced that FINRA, the self-regulatory organization for the securities industry, approved the buyout of SeedInvest. SeedInvest is a registered broker-dealer, which is why the deal needed FINRA approval.

We work closely with SeedInvest. Many of our First Stage Investor recommendations – including HyperSciences, Digital Brands Group, EnergyFunders, NowRx, WorldViz and Gryphon – were found on SeedInvest’s platform.

We also recommended SeedInvest itself (to our accredited investor members) back in April 2014. Those members will be hearing shortly from SeedInvest about exactly how much money they made. (We’ve been asked by the folks at SeedInvest not to publicize this number for now.)

SeedInvest is one of the more successful equity crowdfunding portals in the U.S. You’ll consistently find high-quality startups raising money on its site.

It has also done a good job of nurturing both sides of its startup marketplace – the startups (sellers of private equity) and the investors (buyers of private equity). That can be a difficult “chicken and egg” conundrum for a startup to conquer.

As a broker-dealer, SeedInvest can list security token offerings (STOs) in full compliance with the SEC – a big factor in Circle’s decision to buy it. Circle has big plans to tokenize securities.

“We believe that the tokenization of financial assets will ultimately unlock capital for growing companies and investment opportunities for people everywhere,” Circle wrote in a blog post announcing the approval of its purchase of SeedInvest (emphasis mine).

The first asset group the Circle team will seek to tokenize is startup equity, via its partnership with SeedInvest. SeedInvest itself makes that clear in a post recently published on its site.

“We believe that tokenizing startups can take things to another level by providing liquidity [and] enabling capital to flow,” SeedInvest wrote.

“Tokenizing startups” simply means tokenizing the private shares of these companies. Digital coins, instead of paper shares, become the instrument through which dividends are paid, profits are shared and interest is paid.

Tokenization technology makes too much sense NOT to catch on. It will provide instant liquidity and eliminate the need to write big checks. Smart blockchain contracts will automate a large swath of trading service functions… and eliminate the entire backroom operations of banks while making the buying and selling of shares through tokens much faster and cheaper.

And a much wider base of retail investors will be able to invest in startups.

In its post, SeedInvest points out that it “will continue [to be] focused on democratizing startup investing, just with greater resources.” Those resources include Circle’s global customer base of more than 8.5 million individuals and 1,000 institutions.

Both companies should be able to play off each other’s strengths. SeedInvest will add to Circle’s ability to reach out to everyday investors. And Circle will give SeedInvest an exciting path into the future and the wherewithal to traverse it.

It’s a future that both Circle and SeedInvest deeply believe needs to happen. And – in the proud tradition of needle-moving startups from Facebook to Uber – they’ve appointed themselves as the key agents of this change.

Circle and SeedInvest make a good match. I think SeedInvest would have been foolish to go down this path by itself. And Circle has made a good choice in partnering with one of the top startup portals in the U.S.

Make no mistake, both companies are thinking big. “Startups are just the beginning,” SeedInvest said. “Circle is just getting started.”

“We will also explore future opportunities enabled by tokenization,” Circle added.

That’s it. They offer no clarification on what’s coming after startups. But the possibilities are endless. Practically every kind of asset under the sun can be tokenized. Real estate. Works of art. Entire stock exchanges. Debt instruments. Precious metals. Mines. Construction projects.

It will transform how we engage in investment and financial transactions. Imagine owning a piece of a gold mine in Peru… the Petronas Towers in Kuala Lumpur… a new bridge from Buffalo into Canada… an Andy Warhol painting…

As I said, the possibilities are endless. Circle and SeedInvest are blazing a path they hope will turn into a highway. And we not only share their vision but also plan to be driving down that highway with YOU on board.

“Nothing really changes,” SeedInvest told me. “You’ll be able to source more deals for your members, starting with startups and then expanding into numerous other assets your members most likely haven’t had access to.”

Sounds good to us. We’re always on the lookout for interesting alternative assets our members can access. Personally, I’m looking forward to working closely with SeedInvest and encouraging its foray into various tokenized asset groups.

Good investing,

Andy Gordon

Co-Founder, First Stage Investor

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