Bitcoin Garden interviewed William Pividori and Sergio De Prisco, Founders of SEED Venture.
SEED Venture is an open source platform based on blockchain technology which provides tools that allow financing new innovative projects from the first phase (so-called “seed stage”), limiting risks and following the growth step by step. The funds are allocated directly to the start-ups and used to reach the milestones declared; the platform is a monitoring tool that allows the support during the entire “early stage” phase (3-5 years). Each project completed successfully will bring value to the investors who have participated in it.
SEED Venture is the place where investors, incubators and start-ups can meet and interact, minimizing risks and sharing objectives, giving space to the potential of the ecosystem, so that no good idea goes to waste. Funding will be released during the project’s progress in a completely autonomous and transparent manner, and its use can be verified.
Emanuele De Prato (EDP), graduated in Business/Managerial Economics at the University of Udine, actually Analyst at Poetronicart and Product Specialist at SEED Venture, interviewed for Bitcoin Garden, William Pividori (WP) and Sergio De Prisco (SDP), Founders of SEED Venture.
E.D.P. – What is blockchain technology in your opinion and what are its advantages?
S.D.P. – Blockchain is a record of all changes in the state of a system, it can be defined as a “history book” of a system. The conservation of these data is useful only if they have to be shared within a plurality of actors who don’t know each other, don’t trust each other, have conflicting interests or different operation rules, and don’t want or cannot have a central authority that hold the register. A blockchain is therefore a decentralised register, self-managed by users. To ensure data integrity in absence of a coordinator, the rules for the formation of the registry (the protocol) must include a strong algorithm of consensus that must converge the different versions produced by the autonomous activity of the actors on a single shared version. In order to guarantee the only integrity of the data, it is sufficient to anchor them to a “secure” blockchain or to structure them in blockchains anchored in each other, until creating a system that permits to avoid a possible collusion of part of the actors. Decentralisation is not only an advantage, but a necessity. The global economy, in order to function, needs to share an enormous mass of data globally, but their global control is neither possible nor desirable. Centralised control is possible, however with inefficiencies and obstacles to innovation, only at national level. An ecosystem of distributed registers is the technological prerequisite for sharing data and bringing control back to the, often-overlapping, producers and users.
E.D.P. – Cryptocurrency and tokens as tools for value exchange: why not fiat currency?
S.D.P – Tokens allow the representation and transfer of underlying rights of the exchanged value, not only the value, in a way and with an extension that has never been possible until now. If we are talking about currencies, crypto or not, a good form of money must be transportable, durable, divisible, fungible and be effective as a means of exchange, unit of account and reserve value. What we will see comparing these qualities in euro and bitcoin, the most adopted cryptocurrency? We will see that, in a free exchange environment, euro is a form of money preferable to bitcoin because it offers all the requirements, while bitcoin is little fungible, because it is easily traceable, and is an unreliable unit of account, due to the high volatility of the price. However, in the absence of free trade, euro turns into a currency: not very transportable, since moving money can be difficult or impossible, in the presence of embargoed countries, currency restrictions, blocking of transactions and freezing of current accounts with no possibility of explanation and no right of defence; not very fungible, since transactions are only permitted by documenting the origin of the funds; impaired as a means of exchange, because some transactions cannot be made, even by the simple political will of a government, making the underlying exchange impossible; ineffective as a store of value, in the presence of continuous issuance of money by central banks. In addition, a legal tender currency can also become unusable as a unit of account when the continuous issuance of money leads to hyperinflation, as periodically happens in less free countries. In the absence of free trade, despite its low adoption, bitcoin is superior to euro as a form of money because it remains transferable and available as a means of exchange in all situations and has proven to be a better long-term value reserve. In a widely adopted regime, bitcoin can also exceed euro as a unit of account, while appropriate second-level protocols can also make it fully fungible, making it an almost perfect form of money.
E.D.P. – Why was the SEED Venture project born? From which market need?
S.D.P. – Innovation is articulated in research and development: SEED Venture exists to facilitate their development. Innovation is developed by startups and other companies that allocate resources for this purpose. If companies start to find it more convenient to buy innovation externally, as the so-called “open innovation” approach provides, startups may end up developing innovation exclusively. This great expectation has not so far been accompanied by suitable instruments for their financing and entrepreneurial support: SEED Venture is this instrument.
W.P – Since we have supported startups in our country of origin, the main flaws in local venture business have clearly emerged (which can be found also in other EU and non-EU countries). Looking at Italy, international practices have been poorly replicated, with the attempt to reconcile a very confusing framework of rules and definitions sometimes not very clear and effective. In addition, it’s necessary to point out the fact that often large companies, but also the system of incubators and accelerators (Italian, but not only), ignore what Open Innovation is, which doesn’t mean offering mere prizes for startups, hackathons, sponsored acceleration programs. A certain kind of culture is not makeshift, and therefore it becomes necessary to propose new solutions and new mechanisms that permit to overcome all these limits. In addition to these, there are also those flaws that derive from the traditional characteristics of the Venture Capital, namely that investments in startup equity are illiquid and with an intrinsic high risk of loss. SEED Venture born because of this market status quo.
E.D.P. – What is the main value proposition of the project?
W.P. – SEED Venture intends to bring together the supply and demand of capital for innovation, ideally making the role of the proponent central, through a single peer-to-peer system completely free and decentralized, because based on public blockchain. To investors (the demand) is given the opportunity to easily participate in a market mainly reserved to professionals (venture capitalists), relying on the easy liquidability of investments in traditionally illiquid assets, freely participating in a transparent and unchangeable ecosystem (which triggers real competition between proposers) and also to have direct control of everything happens in the absence of the third party. Startups (the offer) have the possibility: to be supported, or represented, right from the first stages by a qualified partner, the proposer, who is ideally aligned to the investors’ objectives, but without putting pressure on the startup; to obtain immediately the capital raised and necessary for the project without wasting time to sign agreements; to increase the possibility of greater funding thanks to an existing and liquid secondary market that attracts more investment. In general, the underlying technology enables the creation of a large and distributed ecosystem that invites to evolve the current business models of the actors that actually operate in the innovation chain, to the benefit of the participants as a whole. SEED Venture also represents an engine that can be integrated with various types of entities that propose investments, operating in the financial sector, from the most innovative and risky assets (startup equity) to more traditional ones such as lending or real estate.
E.D.P. – Alternative finance more and more towards decentralized finance?
S.D.P – Despite the good will, no regulation is able to generate innovation; those ones written better can at least avoid hindering it. In fact, regulations tend to be written to ratify what exists and to protect involved actors. Since innovation always threatens established interests, investing in innovation is always a challenge to the standard. For this reason, following regulatory interventions aimed at protecting threatened interests, investing in innovation is always a high-risk operation. Decentralisation mitigates the effects of regulatory measures, since they are limited to the jurisdiction in which are in force, preventing activities from being stopped everywhere. This allows the more liberal jurisdictions to gain competitive advantages and leads, in short, to the rethinking of the more repressive ones. Finance is the most regulated sector in absolute terms and therefore the one in which the effects described are amplified; it is therefore the sector that can benefit most and most rapidly from decentralization. The explosion of decentralized finance is the consequence of this.
W.P. – In addition to what Sergio said, we must also consider the geopolitical factor, specifically the predominance or influence of strong countries over those considered weak; the strong ones are the same countries that have created mechanisms or systems (financial and non-financial) accessible only where there are predefined conditions. For example, in the African continent the number of so-called “unbanked” (i.e. those who cannot open a current account) is significant. Through decentralized finance, thanks to a mobile phone and a data network, anyone has the right to access transparent financial systems and be able to exchange value, or to save it safely.
E.D.P. – SEED Venture as a solution to problems of illiquidity and poor investment monitoring.
W.P. – Those who operate professionally (Venture Funds/Business Angels) are aware that venture investing is characterized by a very high risk of loss and a time profile of return not lower than 5-7 years. So, it is common for these professional entities to include a figure within the supervisory bodies of such investments (startups) to act as a supervisory authority. Over the last decade, however, we are witnessing a growing interest in this type of investment by both ordinary people, the so-called retail, and institutional investors. Retail, however, is not able to deal with such high risks and a blockage of invested capital for such long periods of time; moreover, it doesn’t have the necessary skills in terms of evaluation as well as support or supervision, and often there is also the impossibility or complication of participating in such investments. For the institutional sector, the issues are more or less the same, namely from the point of view of not being structured or not having the convenience to be structured (both in terms of size, market and potential statutory and/or regulatory limitations). We strongly believe SEED Venture is the answer, whose decentralized mechanism creates a market in real competition where the distribution of risk is immediately offered and assets are easy to liquidate (which today is impossible to apply), and whose model allows the centrality of the proposer/supplier who fills all the gaps (or lack of cost-effectiveness for the professionals) in terms of selection, evaluation, coaching/support to success.
E.D.P. – Why in Italy investments in startups are so low?
W.P – The most common answer, comparing the size of the market in reference to other countries, is the cultural one, but it is almost a paradox if we think on the strong entrepreneurial propensity of the country. In reality, until today there is a lack of willingness to create a socio-economic fabric favourable to venture investing, considering that it would be enough to concretely replicate international practices; at the same time, innovation is not represented by an ecosystem of supply chain with a healthy competition, but each subject moves in its own narrow local context: the result is the so-called dwarfism of startups (the really disruptive ones, shortly after their birth, are already abroad) and the reduced attractiveness of foreign investments in Italian startups because they are not really ready to penetrate the global market, if not in only few cases. Basic reasons are almost identical also for the Italian investor, certainly held back by the reduced propensity to do so compared to other countries.
E.D.P. – What is the expected future of investments in startups and where is the SEED Venture project located?
W.P. – If we look at the historical data, the future of investments in startups remains always brilliant: faced with a correct risk balance, it has offered in most cases average performance (between complete losses and exit reached) well above most traditional financial investments, with the same time horizon. SEED Venture is a standard that offers the possibility of participating freely in this type of investment to those who today are cut off or don’t find it convenient to do so. At the same time, it is a powerful tool for intermediaries willing to seize the opportunity that the underlying technology offers thanks to the integration of SEED Venture, implementing new highly effective and profitable business models.
- To Lean more about SEED Venture, please visit the official website: https://seedventure.io/