Yesterday, the Deutsche Börse Venture Network (DBVN) added blockchain fintech firm Cashlink to its member list to offer digital shares to investors. Using Cashlink’s distributed ledger technology (DLT), members of DBVN can get access to the issue of digital securities.
Founded in 2015, DBVN connects investors and startups to help drive growth in pre-IPO companies. It boasts of 190 companies and over 375 global investors. The network has raised roughly $3.6 billion to date, and seven investee firms have listed on the Frankfurt Stock Exchange.
Startups sometimes get seed funding from friends, family and anywhere they can. But as they grow, they often tap professional investors, whether that’s venture capital funds, business angels or high-net-worth individuals. These digital securities are only available to this kind of investor.
Using Cashlink’s platform, DBVN members get higher liquidity for the stakes they hold in a startup. These digital securities will be freely transferable, tradable and will also earn dividends. But one difference here compared to a traditional shareholding is the lack of voting rights. This might be a turn-off for venture capitalists, but for high net worth individuals and others, it may not be a big concern.
We’ve asked Cashlink about the voting rights but did not receive a response by the time of publication.
“With the new offer from our partner, we are simplifying the raising of capital for startups from our network, all within a regulated framework,” said Peter Fricke, head of Deutsche Börse Venture Network.
Cashlink already had a relationship with DBVN as it operates out of DBVN’s FinTech Hub in Frankfurt. The startup has backing from German listed VC Finlab. At the moment, the platform is only available for institutional investors and not retail investors.
“The digital securities are suitable for various purposes, for instance as an alternative to conventional venture capital financing, as digital employee participation, as a digital representation of venture capital funds or for investment by non-European investors,” said Cashlink CEO Michael Duttlinger. Cashlink avoids the use of the term “token”, although it is a member of the International Token Standardization Association (ITSA).
Cashlink has raised funds for itself by issuing its own digital securities on the blockchain. Back in July, German crypto-fintech Coindex issued stock using Cashlink’s framework.
Outside of DBVN the Deutsche Börse is actively working on tokenizing equities and other assets. Together with Swisscom and Sygnum, it helped to launch the first regulated digital asset bank in Switzerland.
Just last week the Deutsche Börse worked with Commerzbank and asset manager MEAG to enable instant settlement for tokenized securities. In the delivery versus payment (DvP) transaction, both the cash and security were tokenized.
And the exchange is also a key participant in the HQLAX solution to use distributed ledger technology (DLT) for collateral management.