Aquanow launches AQN Digital Ventures Fund to back next generation of blockchain startups

Fund has already invested more than $1 million in seven companies, including BoomFi and Mash.

Digital assets infrastructure provider Aquanow has launched a blockchain technologies fund. It claims the AQN Digital Ventures Fund will give investors access to the next generation of founders and businesses.

Michael Kwok, head of venture capital at AQN Digital, told BetaKit that the fund’s investors are made up of investors with close relationships with Aquanow, including early investors and customers who have followed the business over the years.

“While there are many promising founders, having a trusted partner such as Aquanow, who has navigated the highs and lows of the crypto space, is important.”
– Michael Kwok, AQN Digital

Aquanow said it has already invested in seven portfolio companies. The startup is backed by private-equity firm Radian Capital, with ownership heavily concentrated among its founders and employees, according to The Logic.

“We believe that this is very in the early innings of Web3, and a wholesale change in terms of how the global financial system operates,” Kwok said. “We also believe that while there are many promising founders, having a trusted partner such as Aquanow, who has navigated the highs and lows of the crypto space, is important.”

Kwok said the fund is valued at $13.4 million CAD ($10 million USD) and targeting early-stage investments in blockchains and projects.

BetaKit was initially told that the fund has closed $6.7 million CAD ($5 million USD) to date. Following publication of this story, a spokesperson for Aquanow told BetaKit that this $6.7 million figure is incorrect and the result of a miscommunication between Aquanow and AQN Digital. “Only the AQN side has knowledge of the amount that was raised,” the spokesperson said, noting that AQN had declined to disclose the accurate amount.

The spokesperson also noted that Aquanow had contributed to the AQN Digital Ventures Fund, but declined to share the contribution amount.

The fund participated in the $3.8-million seed round of digital-currency payment processing platform BoomFi in June. It also invested in cryptocurrency FinTech startup Mash last year. AQN Digital Ventures Fund said it expects to make one to two additional investments per month moving forward.

“To date, the fund has deployed $1 million into seven companies, including BoomFi and Mash, and have a healthy pipeline of deals under diligence as we head into Q4,” Kwok said.

Kwok noted that many startups are at the stage of the crypto cycle where many tenured operators and builders are deciding to launch a business in the crypto space.

“These people have likely worked in the industry for years; they have an immense amount of knowledge that they’ve accrued and they’ve likely identified very specific customer pain points, as well as unique ways of solving those pains at scale,” he said. “One of the things that we’re excited to do is back these promising founders with a strong vision and be one of their earliest cheques.”

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The fund is targeting between $100,000 and $500,000 per investment, and is aiming to make up to two investments per month going forward.

Kwok said that verticals in the crypto space that Aquanow is particularly interested in include, but are not limited to, payments, infrastructure, and compliance. “In addition to companies with strong founding teams with a clear vision, we look for potential investments that tie into Aquanow’s core business of digital asset infrastructure and liquidity,” Kwok said.

The fund claims to serve an international customer base, including banks, neobanks, brokerages, and payment companies. Established in 2018 and headquartered in Canada with offices in Toronto and Vancouver, Aquanow currently has more than 100 employees.

Phil Sham, Aquanow’s CEO and co-founder, comes from a traditional financial background. His prior experience includes serving as principal of quantitative equities at Connor, Clark & Lunn Financial Group (CC&L) where he was responsible for electronic trading in global equity markets. He also served as director of equity markets for CIBC.

In 2022, Aquanow registered AQN Asset Management, Ltd. with the British Columbia Securities Commission (BCSC) as a portfolio manager, investment fund manager, and exempt market dealer; and with the Ontario Securities Commission (OSC) as a portfolio manager and commodity trading manager.

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At the time, Aquanow wrote that AQN Digital is appreciative of the work by the BCSC and OSC to define a regulatory framework allowing the company to pioneer sophisticated digital-assets investment funds for Canadians in a safe and transparent manner.

“The framework enables AQN Digital to pursue novel activities such as decentralized finance and crypto-asset lending when suitable, to achieve investment objectives for its clients,” the startup said in a statement.

“AQN Digital will provide Canadians with exciting opportunities to invest easily and securely for exposure to crypto markets and blockchain technologies,” Sham said at the time of the filings.

“I expect the institutions that have the confidence of the regulators will come out on top,” Sham recently told BetaKit.

Added Kwok: “We believe Aquanow’s strong reputation in Canada and globally as an advanced and disciplined operator will help us participate in the most promising venture capital opportunities in the space.”

Update (9/20/23): This story has been updated with additional commentary from Aquanow and AQN Digital regarding the current fund total.

With files from Josh Scott.

Feature image courtesy Pexels. Photo by Karolina Grabowska.

Charles Mandel

Charles Mandel

Charles Mandel's reporting and writing on technology has appeared in, Canadian Business, Report on Business Magazine, Canada's National Observer, The Globe and Mail, and the National Post, among many others. He lives off-grid in Nova Scotia.

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