Something big happened last week, and it hit close to home. Circle bought out startup investment portal SeedInvest.
We recommended SeedInvest to our accredited investor members back in April of 2014. We know we’ve made them a pretty big profit. We just don’t know exactly how big at the moment.
We’ve also sourced many of our First Stage Investor portfolio holdings from SeedInvest. Digital Brands Group, EnergyFunders, NowRx, WorldViz and Gryphon were all on SeedInvest. And they’ve all been added to our portfolio since March.
So what is Circle, and why did it acquire SeedInvest?
Circle is a cryptocurrency finance company with big ambitions. It’s in the news quite a lot. I happened to quote Circle’s CEO, Jeremy Allaire, just last week in an article I wrote about how crypto is using the OTC (over the counter) market to engage institutional investors while everyday investors are using exchanges.
Circle is ratcheting up its activities on both fronts.
Its OTC business has seen triple-digit growth in enrolling new customers – mostly high net worth individuals and funds.
Circle, like SeedInvest, believes in democratizing investing. It has taken a number of steps to bolster the retail side of its business. Earlier this year, it acquired crypto-to-crypto exchange Poloniex (for the unconfirmed sum of $400 million).
It launched a new service, “Circle Invest,” which makes it easier for crypto newcomers to get started with crypto trading by letting users buy all the coins on Circle (each weighted according to their market capitalization) with a single investment.
It also added a new service called “Collections.” This one lets users buy a subset of tokens. Available subsets include one for platforms, one for payments and another for privacy.
So Circle is stepping up its game on the coin trading front. And with its purchase of SeedInvest, it now has a partner with a similar value system focused on opening up investments to the masses.
SeedInvest will add to Circle’s ability to reach out to everyday investors. Being part of Circle provides SeedInvest with a path to start providing regulated crypto coin offerings to all of its users, accredited and non-accredited alike, via the equity crowdfunding exemptions provided under the Jobs Act.
“Regulated” is the key word here. Circle likes the fact that SeedInvest is a registered broker-dealer, which allows it to handle securities trades in compliance with the SEC’s securities rules. (Circle also has plans to turn Poloniex into a regulated exchange.)
It’s a very smart move by Circle. SeedInvest does a great job of vetting high-quality equity investing deals. Those are the same fundamentals needed to find and vet high-caliber companies raising money through ICOs.
Alexandra Tynion is a principal at SeedInvest and one of the people we work most closely with at the company. She told me that SeedInvest will help Circle increase the number of companies seeking capital while bringing an increasing number of compliant ICO deals onto the SeedInvest platform.
“We have the same mission as Circle,” she said. “Providing capital and transparency and sourcing more deals.”
It’s also a positive development for us and our members. SeedInvest will have more resources to draw upon, which is never a bad thing. We’ll have another portal that we know well and trust to source both crowdfunded equity and crypto securities (joining Republic, MicroVentures and others we work with).
“Nothing really changes in how we work together,” Alexandra told me. “You’ll just be able to source more deals from us – more blockchain, more ICO and more equity startup opportunities.”
We’re happy for CEO Ryan Feit and our other friends at SeedInvest. We think Circle has joined forces with a great outfit, and we look forward to working with SeedInvest more than ever.
Which means our members are the true winners of this latest development.
Good investing,
Andy Gordon
Co-Founder, First Stage Investor