With the popularity of digital currencies, a new array of potential investors entered the market. Armed with their digital currency earnings, these investors represent a changing tide, where the once distinguished line between the stock market and digital assets is rapidly fading. Vancouver-based InvestX hopes to take advantage of that shift.However, investors that earned a small fortune from digital currencies through early adoption might not know how to diversify their earnings, or may not have the access needed to invest in privately traded companies. Understanding this, InvestX recently launched a $100 million USD fund (over $125 million CAD), believing it to be the first of its kind to accept digital currencies. In an interview with Coinsquare Discover, InvestX CEO Marcus New provided insight into the company’s motivation to interact with the world of digital currency.
InvestX aims to provide investors with opportunities to enter an asset class that may have been previously unavailable. New cited Cambridge Investment Research as evidence of prosperity in the ‘growth equity’ asset class, yet explains that few have access. As a result, InvestX is attempting to open the door for accredited investors to invest in privately traded companies through their fund. “What we’ve tried to do is democratize it [growth equity] and make it available for all accredited investors, not just a very small exclusive number of institutional investors that get access all the time to these companies,” said New. “We wanted to make sure, from our business’s perspective, that we would actually be able to create this access for everyone else, not just that small exclusive club of investors.”
“Speaking to a lot of people in that area, what we’ve found was that the ‘libertarian approach’ was a very familiar theme to initial coin investors,” said New. “When we spoke to a lot of investors they acted in a very similar way to what we saw happen in the Dot-com era.” The Dot-com bubble of the late 90’s involved overwhelming investments in internet companies as a result of excitement towards the internet’s progress. The craze drove many to make ‘short-sighted’ investments, and investors incurred sizeable losses as a result. “In the Dot-com era, what would happen is you would make money on some Dot-com, and you would automatically take all that and put it into other Dot-coms,” he added. “If you look at that specific time, people that took small percentages off the table and put them into other asset classes were the ones that actually kept a lot of their wealth.” New further cited Mark Cuban as an example of an investor that foresaw the era’s potential downfall. His Dot-com investment was Broadcast.com, and when Yahoo! acquired them, Cuban received over a billion dollars worth of Yahoo! stock. Instead of pouring his profit back into Dot-com companies, Cuban diversified his investment into other asset classes, resulting in his current multi-billionaire status.With a new wave of wealthy individuals created as a result of the digital currency craze, New’s parallels to the Dot-com era could hold validity. Recently, for instance, the Winklevoss twins became the world’s first bitcoin billionaires, yet purportedly returned to being millionaires as a result of the market crash.
With the fund, InvestX is attempting to guide wealthy digital currency holders away from the mistakes made during the Dot-com era. To do so, the fund makes it easier to invest in other asset classes directly with digital currency. Earnings can then be repaid in either the same digital currency or in fiat. As New explains, the ease of investing in altcoins - and the difficulty of investing in other asset classes - may prohibit investors from diversifying. As a result, New claims that these investors are at risk of profit loss in the event of another market dip, and hopes to make the process more simple.While this fund is only available for accredited investors (defined in Canada as investors with over $1 million CAD in assets, among other criteria), New assures that this advice is important, even for investors that don’t choose to use the fund. “From an education perspective, put it into any asset class. It doesn’t have to be our fund,” said New. “Take out a small portion of the profit and just keep putting it into other asset classes. At the end of the day, long term, we want those individuals to really benefit from their insight and not have an experience like in the Dot-com era.”
InvestX operates out of Vancouver and praises the access to investment opportunities granted by its North American location. However, the fund solely deals with the growth equity class. As such, its bid to give investors access to privately traded companies does currently not include any Canadian organizations. New explains that this is a consequence of the lack of Canadian businesses that meet their strict criteria, which are put in place to ensure profit and minimize potential risk for investors. “Companies have to be worth at least a billion dollars, they have to be growing at 40% a year, and we need evidence of a liquidity event within 12-36 months,” said New. “But what’s really good about having such stringent criteria is that it really helps us to lock in the the return profile that we’re looking for.” While these criteria currently exclude many Canadian companies, InvestX is an example of an innovative approach to digital currency in Canada. As a result, the company is further evidence of Canada continuing at the forefront of the blockchain and fintech industry.
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