Unicorns – companies that attain a value of $1 billion or more – are undoubtedly one of the hottest topics these days in the investment space. Dozens of projects compete in various segments, but only a few investors were fortunate to gain their slice in those privately-held firms before the sale to the public.
In addition, many of these high-growth companies prefer to stay private for much longer as they don’t find compelling reasons to go public through an IPO. A recent study revealed that venture-backed corporations usually take up to 5 years before they make the leap for a public listing.
Surprisingly, staying in the private phase provides many privileges to these unicorns. For instance, a pre-IPO venture-backed company is subject to fewer levels of reporting requirements and scrutiny from regulators as compared to publicly-listed companies.
Additionally, privately-held unicorns aren’t at the risk of hostile takeovers by deep-pockets who could water down the influence and control of their founders and change the business model. As such, going public through an initial public offering doesn’t necessarily have much value to unicorns or their venture capitalists.
Meanwhile, average investors, including non-crypto traders, don’t want to miss out on the explosive growth of these high growth companies if they have to wait for the public listing to get their exposure.
In a nutshell, there is a boom in unicorns, with several joining the list every year, but they remain as hard to approach as they remain privately owned for longer.
On the other end of the bridge, some early backers want to exit or get rewarded for the risk they took before a unicorn goes public.
With the mainstream finance space increasingly embracing blockchain’s native capabilities, there is a new way for investors to get involved in the unicorn investment. The nascent technology opens not only unique channels to more risk-takers, but also rewards early investors and allows founders to “fast track” their ideas without being constrained by a high burden of regulation.
Thanks to blockchain firms such as Convergence, unicorns can stay private without frustrating the desire of their early-stage funders to cash out through these investment channels.
By taking an innovative approach, Convergence Protocol also brings liquidity to real-world assets by implementing a decision-making process that has been successful so far. This will unlock trillions of dollars into the DeFi space while providing liquidity and crucial use cases through merging with promising ventures.
Convergence brings real-world assets to the DeFi space by creating “unforeseen liquidity” with an automated market maker model.
Via a two-layer process, the AMM allows tokenized securities that were issued by partner projects to be “wrapped,” and then traded by investors and fund managers. The company’s offering covers real-world assets that are rarely integrated. Specifically, their tokenized assets include fractionalized investment-grade NFTs, early-stage unlisted crypto project tokens, and even shares of companies like SpaceX.
Wrapped tokens are crypto instruments fixed to the value of another blockchain asset. For example, Bitcoin can be represented on the ETH blockchain as an ERC-20 token backed 1:1 with the No.1 cryptocurrency held in reserve. This collateral model allows for the representation of assets to move across different blockchains by acting as a type of bridge.
The overall process is more dynamic as fragments of the respective assets are tradable 24/7. In the coming months, Convergence expects to wrap a significant number of fast-growing companies.
The unicorn boom has clearly exceeded expectations and can point to growth figures of staggering proportions. A recent study shows that over 600 unicorns collectively valued at over $2 trillion were under the radar in 2020.
While this figure promises inclusion for everyone, accessibility has been a pain point thus far despite the lack of liquidity in many cases.
Tokenization can cope with this by bridging the gap and thus allows everybody to gain from the buzz around unicorns. The mechanism also grants investors owning real-world assets and equity access to DeFi with full legal compliance.
Companies like Convergence can integrate the real world-assets into DeFi through an efficient wrapper. This approach will substantially foster mainstream adoption and present an out-of-box solution for the combination of tokenization and DeFi.
This will also provide much-needed liquidity for decentralized finance as even investors not familiar with blockchain have the chance to take part.
Unicorn investing is not only about looking for high-performing companies that can make huge returns, but it’s also equally important to invest in them early. Getting involved as early as possible means greater equity, control, and eventual profits.
What’s more, today’s billion-dollar startups represent a highly varied array of industries – fintech, fashion, food, health, biotech, transportation, among many others – with no sector emerging as a clear leader.
Although it’s not difficult to see the same proliferation of unicorns in 2021 and beyond, blockchain technology presents an opportunity for those that want to become part of this entrepreneur elite. Other benefits include cutting out intermediaries, which are replaced by blockchain-based governance models that conduct transactions more efficiently and at lower costs.
This post was last modified on Oct 19, 2021, 20:53 BST 20:53