In the last few weeks, crypto has seized the global tech sector’s attention. From Tesla CEO Elon Musk going cold on bitcoin, to firms like Coinbase going public, the space has been buzzing with activity.
“There’s really no doubt that this space is moving closer and closer to mainstream adoption.”
Now, a global venture firm with Canadian operations and $700 million in assets under management is looking to throw its hat in the ring. White Star Capital recently completed the final close of its Digital Asset Fund, raising $50 million USD from limited partners Bpifrance and Ubisoft, as well as several undisclosed family offices.
The Digital Asset Fund, which represents White Star Capital’s first specialized fund and exceeded its original $30 million target, was created to invest in crypto networks and blockchain-enabled businesses. The fund has a focus on North America and Europe and has already invested in two Canadian startups.
Speaking with BetaKit, Sep Alavi, general partner at White Star Capital, said the firm launched the fund to help bring a level of institutionalization to the crypto and blockchain sector. Alavi has been an investor in the crypto sector since 2015, but said the asset class was not “institutionalized enough” at the time for White Star Capital to get involved in.
“There’s really no doubt that this space is moving closer and closer to mainstream adoption,” Alavi said.
“Once we saw that there was regulatory clarity around the sector, there was institutional adoption in this sector, the quality of entrepreneurs and the migration of talent from the tech side into the sector, we thought this was the perfect opportunity to get into it,” he added.
White Star Capital began raising the fund around one year ago, according to Alavi. It has already made six investments through the fund, with its first investment being in a Montréal-based firm called dfuse, which offers an open-source platform for searching and processing blockchain data. Alavi said White Star Capital warehoused the company, meaning the firm invested prior to raising the new fund. More recently, White Star Capital added Ledn, a Toronto-based startup offering savings and loans for digital assets, to the fund’s portfolio.
The fund is being led by Alavi, who is based in New York, and supported by principals Sanjay Zimmermann in Toronto and Thomas Klocanas, also based in New York. The firm is also hiring an associate in New York, who is yet to be announced, which would bring the fund’s team to four people.
Alavi declined to disclose how much of the fund would be allocated specifically to Canadian companies but noted the fund is saving 40 percent of its investments to North America, 40 percent to Europe, and 20 percent in other regions, such as Asia. The fund has a current investment period of three years, and 15 percent of the capital has already been deployed, including to the two Canadian startups.
The Digital Asset Fund will invest between $500,000 and $3 million into between 15 and 20 seed- to Series A-stage companies. Approximately 40 percent of the fund will be saved for follow-on investments.
The majority of the fund will go towards making equity investments in companies, and Alavi said 20 percent is being earmarked for direct crypto investments. This means White Star Capital will purchase tokens on networks or blockchain protocols that have yet to be launched.
“These are investments in networks that will be launching with their own native token, where we acquire the token as part of our investments,” Alavi said. “In fact, that’s the only way to get access to these investments, because that’s the only place value accrues.”
The closing of this fund comes as the cryptocurrency space continues to garner a great deal of public attention. Historically, the value of many cryptocurrencies has been relatively volatile. It was thrown into even greater disarray recently when Tesla CEO Elon Musk announced the electric vehicle manufacturer would no longer accept bitcoin as a payment for the purchase of its vehicles over environmental concerns. This resulted in a crypto price plunge as investors cooled on the currency.
From a Canadian perspective, crypto has picked up significant interest in recent years, despite being a young market. Financial regulators in Canada have worked to keep up with the growth of these new currencies and ensure crypto firms, exchanges, and investors are acting in compliance with Canadian law as it makes its way into the mainstream.
Image source Unsplash. Photo by André François McKenzie.