Cryptocurrency startup Circle is venturing deeper into crypto trading. The Boston-based company is now ready to buy equity crowdfunding firm SeedInvest.
If approved by regulators, the move could allow Circle to help match investors with fledgling companies trying to raise money via initial coin offerings (ICOs). It could also allow Circle to offer its own customers a wider selection of coins to trade. Circle made the announcement today, October 5, 2018. Terms of the deal were not disclosed.
“This acquisition will accelerate our strategy of delivering a token marketplace that enables businesses and individuals to raise capital and interact with investors using open crypto rails and infrastructure,” Circle states.
SeedInvest, founded in 2012, is an online platform that links individuals with vetted startups. The company is selective: It says it only accepts about 1 percent of the startups that apply for a listing on its platform. Individuals who sign up on the platform can browse through that list and then, depending on their eligibility, invest in a company. All securities trades on SeedInvest are handled by SI Securities, a registered broker-dealer.
It is easy to see why this deal is attractive to Circle. Most of Circle’s profits currently come directly from token trades. The company has an over-the-counter crypto desk that handles roughly $4 billion in trades a month, according to Circle CEO Jeremy Allaire who recently spoke with Bitcoin Magazine. And earlier this year, Circle acquired crypto-to-crypto exchange Poloniex for a rumored $400 million with plans to turn it into a regulated exchange.
Allaire is preparing for a day when he believes assets of all kinds will be represented as digital tokens, many of them securities. As part of that, “We are trying to build a broad-based crypto finance platform company,” he said. That includes the “fundamental platforms” needed to operate any financial service along with “consumer projects” that allow end users to easily participate.
The SeedInvest acquisition could help protect ICO investors. New York-based SeedInvest is led by CEO Ryan Feit. Last year, Feit told the New York Times he was “legitimately concerned” about investors losing money on crowdfunded startups. “Investing in start-ups is really risky, and it’s very different than buying a used couch. We definitely do not think you should treat it like Craigslist,” he said.
One of the current requirements for listing a company on the SeedInvest platform is that a project has to have at least a minimum viable product or prototype. This contrasts sharply with the ICO world where it has not been uncommon for projects to raise multiple millions of dollars based on a white paper alone.
Circle already has roughly 270 employees in its offices around the globe. T, and the SeedInvest acquisition could bring onboard another 30 employees to Circle’s New York location.